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Trade-Ideas: Dana (DAN) Is Today's "Storm The Castle" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Dana ( DAN) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Dana as such a stock due to the following factors:

  • DAN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $78.1 million.
  • DAN has traded 4.6 million shares today.
  • DAN is trading at 6.75 times the normal volume for the stock at this time of day.
  • DAN crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on DAN:

Dana Holding Corporation engages in the design, manufacture, and supply of driveline products, technologies, and service parts for vehicle manufacturers worldwide. The stock currently has a dividend yield of 1%. DAN has a PE ratio of 327.8. Currently there are 7 analysts that rate Dana a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Dana has been 2.8 million shares per day over the past 30 days. Dana has a market cap of $2.9 billion and is part of the consumer goods sector and automotive industry. The stock has a beta of 2.13 and a short float of 4.4% with 1.65 days to cover. Shares are down 4.1% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Dana as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:

  • DAN's share price has surged by 26.42% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • DANA HOLDING CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DANA HOLDING CORP increased its bottom line by earning $1.40 versus $0.93 in the prior year. This year, the market expects an improvement in earnings ($1.74 versus $1.40).
  • DAN, with its decline in revenue, underperformed when compared the industry average of 10.7%. Since the same quarter one year prior, revenues slightly dropped by 2.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Net operating cash flow has decreased to $106.00 million or 18.46% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Auto Components industry and the overall market, DANA HOLDING CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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