Meritor (NYSE: MTOR) and Dana (NYSE:DAN) are both auto/tires/trucks companies, but which is the better business? We will contrast the two companies based on the strength of their valuation, profitability, risk, analyst recommendations, dividends, earnings and institutional ownership.

Profitability

This table compares Meritor and Dana’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Meritor 17.03% -106.67% 5.68%
Dana 10.80% 30.79% 6.84%

Institutional and Insider Ownership

93.2% of Meritor shares are held by institutional investors. Comparatively, 98.6% of Dana shares are held by institutional investors. 2.9% of Meritor shares are held by company insiders. Comparatively, 1.6% of Dana shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Meritor and Dana’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Meritor $3.15 billion 0.63 $255.00 million $6.02 3.75
Dana $6.37 billion 0.60 $704.00 million $4.71 5.62

Dana has higher revenue and earnings than Meritor. Meritor is trading at a lower price-to-earnings ratio than Dana, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Meritor has a beta of 2.21, meaning that its stock price is 121% more volatile than the S&P 500. Comparatively, Dana has a beta of 1.49, meaning that its stock price is 49% more volatile than the S&P 500.

Dividends

Dana pays an annual dividend of $0.24 per share and has a dividend yield of 0.9%. Meritor does not pay a dividend. Dana pays out 5.1% of its earnings in the form of a dividend. Dana has raised its dividend for 2 consecutive years.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Meritor and Dana, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Meritor 0 3 4 0 2.57
Dana 1 5 3 0 2.22

Meritor presently has a consensus target price of $23.07, indicating a potential upside of 2.18%. Dana has a consensus target price of $23.13, indicating a potential downside of 12.60%. Given Meritor’s stronger consensus rating and higher possible upside, research analysts clearly believe Meritor is more favorable than Dana.

Summary

Meritor beats Dana on 10 of the 17 factors compared between the two stocks.

Meritor Company Profile

Meritor, Inc. is a supplier of a range of integrated systems, modules and components to original equipment manufacturers (OEMs) and the aftermarket for the commercial vehicle, transportation and industrial sectors. The Company’s segments include Commercial Truck & Industrial and Aftermarket & Trailer. The Commercial Truck & Industrial segment supplies drivetrain systems and components, including axles, drivelines and braking and suspension systems, for medium- and heavy-duty trucks, off-highway, military, construction, bus and coach, fire and emergency and other applications in North America, South America, Europe and Asia Pacific. The Commercial Truck & Industrial segment also includes the Company’s aftermarket businesses in Asia Pacific and South America. The Aftermarket & Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement and remanufactured parts to commercial vehicle aftermarket customers in North America and Europe.

Dana Company Profile

Dana Incorporated, formerly Dana Holding Corporation, is a global provider of technology driveline, sealing and thermal-management products. The Company operates in four segments: Light Vehicle Driveline Technologies (Light Vehicle), Commercial Vehicle Driveline Technologies (Commercial Vehicle), Off-Highway Driveline Technologies (Off-Highway) and Power Technologies. It has operations in North America, South America, Europe and Asia pacific. Its Light Vehicle segment offers products, such as front axles, rear axles, driveshafts/propshafts, differentials, torque couplings and modular assemblies. Its Commercial Vehicle segment offers products, such as steer axles, drive axles, drive shafts and tire inflation systems. Its Off-Highway segment offers products, such as front axles, rear axles, drive shafts, transmissions, torque converters, tire inflation systems and electronic controls. Its Power Technologies segment offers products, including gaskets and cover modules.

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