NEW YORK (TheStreet) -- Shares of Fiat Chrysler Automobiles (FCAU) - Get Report are down by 0.15% to $6.74 in late afternoon trading Monday, after the company announced that it is cooperating with a Securities and Exchange Commission investigation.
The SEC investigation into Fiat Chrysler's method of reporting vehicle unit sales to end customers in the U.S., comes while the company is under a similar investigation from the Department of Justice, CNBC reports.
The DOJ's investigation stems from a Chicago-area auto dealer, that filed a civil lawsuit against Fiat Chrysler alleging that the automotive company was inflating its U.S. car sales by paying dealers to report inflated vehicles sales numbers.
Calling it an "old fashioned stuffing the channel," CNBC's Michelle Caruso-Cabrera explained the alleged situation through the example of a food distributor selling extra cans of food to a supermarket, beyond what the supermarket needs. While the supermarket cannot sell the extra product, the food distributor is able to claim bigger sales numbers as a result.
Fiat Chrysler's statement today argues that the company records revenues based on shipments to dealers and customers, not reported vehicle united end sales. In essence, the motor company is stating that it could inflate sales because its revenue recognition comes from the sale to the dealer.
Separately, TheStreet Ratings team rates Fiat Chrysler as a "hold" with a ratings score of C.
The primary factors that have impacted TheStreet Ratings team's rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and solid stock price performance. However, as a counter to these strengths, TheStreet Ratings also finds weaknesses including weak operating cash flow, disappointing return on equity and poor profit margins.w
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: FCAU