DANA CORPORATION: COMPANY HAS LONG HISTORY OF GROWTH, EFFICIENCY

Dana Corporation of Toledo, Ohio, with 320 of 45,500 employees located in the Heartland, has about 103 million shares of common stock outstanding. The stock (symbol DCN) is listed on the New York Stock Exchange and is a member of the S&P 500. It engineers and produces auto and truck parts for the worldwide vehicular market. Its stock ended trading Wednesday at $46 11/16. Dana's stock seems to closely reflect current market conditions and risk, and is probably a good stock to hold.

Charles Dana, a New York attorney, stepped into the breach with money for floundering Spicer Manufacturing of Plainfield, New Jersey. Its founder, Clarence Spicer, was a student at Cornell University when he developed a universal joint and drive shaft for automobiles. He left Cornell in 1904 to patent and market his design, and his young company was over extended by 1913. Dana helped with refinancing, and acquisitions after WWI led to relocation to Toledo in 1929. In 1946, the company was renamed in honor of Dana who became chairman two years later. Dana retired in 1966.

The company continued the pattern of acquisitions started by Charles Dana and had total revenues of $4.9 billion in 1988.

Dana Corp. continues to acquire manufacturing firms around the world. At the same time, Southwood J. Morcott, Chairman and Chief Executive Officer, and his management team are willing to divest to acquire cash to make acquisitions to refocus on the company's core manufacturing business. During 1997, Dana has sold its European warehouse distribution operations and its Spicer clutch business and agreed to acquire Eaton's axle and brake lines. Dana announced Nov. 14 the sale of its share of Korea Spicer Corporation and said it would continue to operate Dana Korea, a wholly owned subsidiary.

Dana's net income fell to about $14 million in 1991 but has grown consistently since then to $306 million in 1996. Income as a percent of sales has grown from .3 to 4 percent during that same period. Together, these numbers suggest improving efficiency as well as growing revenue. Both are good signs.

Dana's P/E ratio is 13 as compared to a market average of 25. That suggests that this stock could be trading as high as $90. Dana also pays a dividend which yields about 2.3 percent at the current price. These two figures alone suggest that there is a lot of room for price increase in this stock.

My research, on the other hand, indicates that Dana's stock is properly priced around $46 in this market. Why is there such a difference? The biggest part of the difference is due to risk that does not show up in measures like P/E and dividend yield.

Dana's revenue stream is exposed to a significant amount of political and currency exchange risk because of its large foreign holdings. It is also exposed to the volatility of both new and replacement auto and truck parts markets. In addition, over half (54.3 percent) of its total capital comes from debt.

If I owned Dana stock, I would continue to hold it. However, since there are many other stocks that are truly underpriced in this market, I can't recommend buying it. I would look for stocks offering better value.

Dividend Reinvestment Plan: Yes

Web Site: http://www.dana.com

Bill Walker is President and CEO of Walkrich Investment Advisors and completes a market appraisal of over 5,000 common stocks each week.

For questions call, 651-9196 or e-mail:Walkrich@mvp.net

The Southeast Missouri does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.