Breaking Down Dana Incorporated (DAN) Financial Health: Key Insights for Investors

You've seen Dana Incorporated's stock price move and you're wondering if the strategic overhaul-the big push to shed non-core assets and cut costs-is actually translating to a healthier balance sheet. The Q3 2025 earnings report gives a clear, positive answer: the turnaround is real, with the company swinging to a net income of $13 million from continuing operations, a massive $34 million improvement over the prior year. That's a textbook execution of a cost-savings plan. This operational discipline is defintely showing up in the margins, with Adjusted EBITDA margin jumping 260 basis points to 8.5% in the quarter, driven by realizing over $70 million in savings. Management is now confident enough to project full-year sales of roughly $9.75 billion and adjusted free cash flow of around $225 million at the midpoint, which is a strong signal of liquidity improvement, but we need to look closer at what the impending Off-Highway divestiture means for the debt structure and future growth in the core segments.

Revenue Analysis

You're looking at Dana Incorporated (DAN) at a pivotal moment. The headline takeaway is that the company is strategically shrinking its revenue base in the near-term to focus on higher-margin, core segments. The full-year 2025 sales guidance for the continuing operations is approximately $7.4 billion, a major realignment from its historical top-line numbers. This isn't a market collapse; it's a deliberate, strategic pivot.

The biggest change in the revenue structure is the planned divestiture of the Off-Highway business, a deal valued at $2.7 billion that's expected to close in late Q4 2025. This move transforms Dana from a diversified supplier to a more focused player in the light- and commercial-vehicle markets. Honestly, this is a smart trade: less total revenue for a more concentrated, profitable business mix.

Here's the quick math on where the remaining revenue comes from, post-divestiture:

• Light Vehicle: Expected to contribute roughly 70% of the 'New Dana' revenue mix.
• Commercial Vehicle: Expected to contribute roughly 30% of the 'New Dana' revenue mix.

The primary revenue sources are the sale of drivetrain and e-propulsion systems, power technologies, and aftermarket solutions. Dana's core focus is on drive systems, electrodynamic components, thermal management, and sealing solutions. The Light Vehicle segment is defintely the primary revenue driver, catering to OEMs for light trucks, SUVs, and passenger cars.

When you look at the year-over-year revenue growth, the picture is complex because of the divestiture. For the continuing operations, the third quarter of 2025 saw sales of $1.92 billion, a modest increase of $20 million compared to the same period in 2024. This small growth is a positive sign, showing resilience despite lower overall market volumes in some areas, like the commercial-vehicle market, which is softening. The Light Vehicle segment, for instance, reported a 5% increase in sales in Q3 2025 (excluding currency effects), driven by higher production volumes in North America.

What this estimate hides is the underlying operational strength. The company is using cost-saving initiatives to offset lower sales volume impacts, which is why profitability metrics like Adjusted EBITDA margin are improving even with relatively flat revenue growth in continuing operations. For more on the strategic direction driving these changes, you should check out the Mission Statement, Vision, & Core Values of Dana Incorporated (DAN).

Here is a snapshot of the continuing operations' quarterly sales performance:

Your next step should be to map out the financial performance of the Light Vehicle and Commercial Vehicle segments individually, focusing on their respective margin improvements, since that's where the future value of Dana Incorporated will be created.

Profitability Metrics

You're looking for a clear read on Dana Incorporated (DAN)'s financial engine, especially now that the Off-Highway business divestiture is nearly complete. The direct takeaway is this: Dana is successfully executing a cost-savings plan that is driving margin improvement in its core business, but its profitability still lags behind the broader automotive parts industry averages in key areas.

The company's focus on its core light- and commercial-vehicle markets is paying off in operational efficiency (Adjusted EBITDA), but the net profitability is still very thin. You need to look past the top-line sales figures and focus on the margin expansion story to understand the investment case here.

Gross, Operating, and Net Profit Margins

When we look at the 2025 fiscal year, we see a company in transition, so we must focus on the continuing operations. The margin structure shows a clear distinction between the gross efficiency and the bottom-line net income (profit after all expenses and taxes).

Here's the quick math on the most recent data from the third quarter of 2025 for continuing operations:

• Gross Margin: In the first quarter of 2025, the gross margin was approximately 9.4% ($2.352 billion in sales less $2.132 billion in cost of sales). This shows a tight control on manufacturing costs, but it's a relatively low figure for the sector.
• Operating Profit (Adjusted EBITDA) Margin: For the full year 2025, Dana Incorporated is guiding for an Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization-a proxy for operational profit) margin between 7.4% and 8.1% for continuing operations. The third quarter of 2025 hit an even stronger 8.5% Adjusted EBITDA margin on $1.9 billion in sales. This metric is defintely improving due to aggressive cost management.
• Net Profit Margin: The net income from continuing operations in Q3 2025 was $13 million on $1.92 billion in sales, resulting in a net margin of roughly 0.68%. This indicates that while the core business is generating cash flow (EBITDA), interest, taxes, and depreciation are still heavily eroding the final profit.

Profitability Trends and Operational Efficiency

Dana Incorporated's profitability trend is one of steady, hard-won improvement, driven by a strategic cost-savings initiative. The company is targeting $310 million in total cost reduction savings by 2026. This focus is what's pushing the margins up, even as sales volumes remain under pressure in some markets.

The operational efficiency gains are clear in the Adjusted EBITDA margin trend:

The slight dip in the 2025 guidance range compared to the 2024 result is due to the divestiture of the higher-margin Off-Highway business, but the 2026 target shows management's confidence in the remaining core business. The Q4 2025 Adjusted EBITDA margin is even targeted to reach 11%. That's a strong signal of momentum.

Industry Comparison and Actionable Insight

To be fair, the automotive supplier business is a tough one, and the industry is facing structural changes. The global automotive supplier industry's average EBIT (Operating Profit) margin was estimated at 4.7% for 2024. Dana Incorporated's Adjusted EBITDA margin guidance of 7.4% to 8.1% for 2025 is a strong performance relative to this global average, especially considering the challenges. However, the median gross margin for U.S. listed Motor Vehicle Parts companies in 2024 was much higher at 16.3%, with an operating margin of 3% and a net profit margin of 0.9%.

Here's the rub: Dana Incorporated's operational profit (Adjusted EBITDA) is competitive, but its gross margin is lower, and its net margin is razor-thin. This suggests that the cost of goods sold (COGS) is still high relative to peers, and the heavy debt load is eating into the bottom line via interest expense. You can read more about the full financial picture in Breaking Down Dana Incorporated (DAN) Financial Health: Key Insights for Investors.

Action: Monitor the Gross Margin trend closely in the next two quarters. If it doesn't move closer to the industry's 16% median, it means the company's structural cost base remains a long-term problem.

Debt vs. Equity Structure

You need to know how Dana Incorporated (DAN) funds its operations, and right now, the balance sheet shows a clear preference for debt. As of the third quarter of 2025 (Q3 2025), Dana Incorporated carries a total debt load of approximately $3.2 billion, which is a substantial figure for an investor to consider.

This debt is primarily long-term, sitting at $2.565 billion, but there has been a notable shift in the short-term structure. Current short-term debt, including the current portion of long-term debt, jumped to about $652 million in Q3 2025 from a much lower level in the prior year. That's a big change, and it means more debt obligations are due in the next twelve months.

Here's the quick math on leverage: Dana Incorporated's Debt-to-Equity (D/E) ratio for Q3 2025 stood at approximately 2.80. This is a high leverage ratio, meaning the company relies on debt financing (liabilities) nearly three times more than shareholder equity to fund its assets. Honestly, that's a high number.

• Total Debt (Q3 2025): $3.2 billion
• Total Equity (Q3 2025): $1.150 billion
• Debt-to-Equity Ratio: 2.80

To be fair, capital-intensive industries like automotive parts often have higher D/E ratios, but Dana Incorporated's 2.80 ratio is significantly elevated compared to the broader Auto Parts industry average, which is closer to 0.58. This high leverage indicates a risk profile where interest rate hikes or a downturn in sales would defintely put pressure on cash flow and debt service coverage.

In terms of recent activity, Dana Incorporated did manage a key refinancing event by allowing a $400 million, 5.75% bond to mature and be paid off on April 15, 2025. However, the high D/E ratio shows a consistent reliance on debt capital for growth and operations. What this estimate hides is the potential for volatility in earnings due to high interest expenses.

The company's strategy is a balancing act: high debt financing is offset by a strong commitment to returning capital to shareholders. Dana Incorporated is executing a $1 billion capital return program, and they repurchased $189 million in shares during Q3 2025 alone, with a plan to hit $600 million in total repurchases for the year. This significant share buyback program is a direct use of equity capital, signaling confidence in the company's future cash generation despite the high debt level. You can read more about their long-term direction at Mission Statement, Vision, & Core Values of Dana Incorporated (DAN).

The key action for you is to monitor the interest coverage ratio, which was 2.7x in Q3 2025, to ensure earnings before interest and taxes (EBIT) can comfortably cover the interest payments on this heavy debt load. If that coverage ratio drops, the risk profile rises quickly.

Liquidity and Solvency

You want to know if Dana Incorporated (DAN) can cover its near-term bills and whether its cash engine is running hot enough. The short answer is yes, the liquidity position is solid and improving, mostly due to strong cash flow management. However, as an investor, you defintely need to keep an eye on the leverage side of the balance sheet, which is elevated as the company executes its capital return strategy.

Dana's short-term financial health, measured by its ability to convert assets into cash quickly, shows a stable picture. The Current Ratio, which compares all current assets to current liabilities, stands at about 1.31. More importantly, the Quick Ratio (or acid-test ratio), which strips out inventory-often the least liquid current asset-is at a strong 1.00. This means Dana has enough highly liquid assets (like cash and receivables) to cover all its immediate obligations without having to sell a single part.

The real story is in the cash flow and working capital (the difference between current assets and current liabilities). For the third quarter of 2025, Dana reported Operating Cash Flow (OCF) of $111 million, a significant increase year-over-year. Even better, Adjusted Free Cash Flow (FCF)-the cash left over after capital expenditures (CapEx)-was $101 million, which is a massive $109 million improvement from the prior year's quarter.

Here's the quick math: that FCF surge is not just from higher profit, but also from lower working capital requirements. This signals better efficiency in managing accounts receivable and inventory. The full-year 2025 Adjusted FCF guidance is anticipated to be around $275 million at the midpoint of the range, which provides a comfortable buffer for operations and strategic moves.

On the financing side, the cash flow is being actively deployed. Dana is executing a $1 billion capital return program, having repurchased 9.5 million shares in Q3 2025, totaling $189 million in returns. The company expects total share repurchases for 2025 to hit $600 million. This aggressive capital return, combined with the pending sale of the Off-Highway business, is shaping the balance sheet. While liquidity is robust, the Debt-to-Equity ratio of 2.23 is something to monitor, as it shows a reliance on debt financing, partially driven by the capital return initiatives. For a deeper dive into the strategic implications of this financial realignment, you can read the full post: Breaking Down Dana Incorporated (DAN) Financial Health: Key Insights for Investors.

• Drive FCF: Q3 FCF was $101 million, up $109 million year-over-year.
• Monitor Debt: Debt-to-Equity ratio sits at 2.23.
• See Capital Returns: $600 million in share repurchases expected for 2025.

Valuation Analysis

You're looking at Dana Incorporated (DAN) and wondering if the market has already priced in the expected gains from their electrification strategy and cost-reduction efforts. That's the right question to ask. My take is that Dana Incorporated is currently priced in the fairly valued to slightly overvalued range, depending on which forward-looking metric you prioritize, but the market consensus leans toward a Moderate Buy based on future earnings growth.

The stock's incredible run over the last year is the main reason for this mixed valuation signal. From October 2024 to October 2025, Dana Incorporated's stock price surged by a massive 156.8%. The stock recently traded around $20.81 as of mid-November 2025, which is near its 52-week high of $22.13 set in late October 2025. That kind of momentum means you need to be defintely precise with your valuation.

Is Dana Incorporated Overvalued or Undervalued?

To figure this out, we look at the core valuation multiples-the Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios-and compare them to historical averages and peers. Here's the quick math for the 2025 fiscal year:

• Forward P/E Ratio: The forward P/E ratio sits at about 10.24. This is considered fairly valued compared to its five-year average of 13.77, suggesting that on a forward earnings basis, the stock isn't overly stretched.
• Price-to-Book (P/B) Ratio: The current P/B ratio is 2.23. This is significantly higher than its three-year average of 1.41, signaling that investors are willing to pay a premium for the company's net assets, which often suggests an overvaluation based on book value alone.
• EV/EBITDA Ratio: The Trailing Twelve Months (TTM) EV/EBITDA is around 5.10. However, a forward-looking calculation puts it at 7.62, which some models consider to be in the Overvalued range, given the five-year average of 6.06.

What this estimate hides is the expected earnings rebound. The company's full-year 2025 Adjusted EPS guidance is a midpoint of $1.40 per share, a significant jump that supports the lower forward P/E. You can dive deeper into the shareholder base in Exploring Dana Incorporated (DAN) Investor Profile: Who's Buying and Why?

Dividend and Analyst Consensus

The dividend picture is stable but not a primary driver for investment. Dana Incorporated pays an annual dividend of $0.40 per share, giving it a dividend yield of approximately 1.92%. The dividend payout ratio is where you see the transition: it was high at 87% based on trailing earnings, but based on 2026 earnings estimates, it is projected to drop to a much more sustainable 20.00%.

Wall Street is clearly optimistic. The analyst consensus as of November 2025 is a Moderate Buy. Of the ten analysts covering the stock, six have a Buy rating and four have a Hold rating.

The average 12-month price target is $23.57. This target suggests a potential upside of around 13% from the recent $20.81 price, with the highest target set at $28.00.

The action here is to watch for execution on the $975 million Adjusted EBITDA guidance. If they hit that, the stock has room to run toward the analyst target. If not, the P/B ratio suggests a quick correction could follow.

Risk Factors

You're looking at Dana Incorporated (DAN) at a pivotal moment, and while the 2025 profit guidance is up, you must map the real risks that underpin the valuation. The company is executing a massive strategic pivot, but that kind of change defintely introduces near-term volatility. The main takeaway is this: Dana's financial health is currently in a high-leverage, high-risk zone, despite strong operational execution in cost-cutting.

Strategic and Market Headwinds

The largest strategic shift is the sale of the Off-Highway business, expected to close late in the fourth quarter of 2025. This move, while focusing Dana on its core Light Vehicle and Commercial Vehicle segments, carries significant execution risk. Any delay or complication in the $2.7 billion divestiture could disrupt capital plans, including the announced $1 billion capital return program.

External market conditions also pose a clear threat. Dana operates in the cyclical automotive industry, and while light-truck demand has been stable, the commercial-vehicle market is softening. This demand softness, combined with the industry's ongoing transition to electric vehicles (EVs), means Dana must sustain its electrification momentum to secure long-term contracts. One clean one-liner: The market won't wait for a slow pivot.

• Softening commercial-vehicle demand.
• Execution risk in Off-Highway divestiture.
• Industry's cyclical nature impacting sales.

Financial Distress Indicators

Honesty, the balance sheet shows significant leverage. The debt-to-equity ratio stands at a high 2.83, which is a red flag for financial stability. Here's the quick math: high leverage means higher vulnerability to economic downturns or unexpected spikes in borrowing costs. Plus, the company's Altman Z-Score is 1.62, which places it in a financial distress zone, suggesting a potential risk of bankruptcy within the next two years.

Interest expense is also rising, putting pressure on net income. In the third quarter of 2025, net interest expense from continuing operations was $44 million, up from $33 million in the same quarter of 2024. This increase is due to higher borrowings and rising rates. You also see a high dividend payout ratio of 0.77, which may not be sustainable given the current leverage and the need for capital investment in new EV programs.

Operational Risks and Mitigation

Operationally, the primary risk is cost inflation and the fluid tariff landscape. While Dana has done a great job mitigating this, the risk is still there. They are expecting to recover the majority of tariff costs this year, but the timing of these recoveries can lag, impacting quarterly margins. Commodity cost volatility, especially for steel and aluminum, also creates a timing lag in recovering costs from customers, which hit the bottom line by $10 million in Q1 2025 alone.

The good news is the company has a clear mitigation plan. Their cost-savings program is aggressive and working. They are targeting $310 million in total cost reductions through 2026, with $235 million expected to be realized in 2025. This operational efficiency is what drove the full-year 2025 Adjusted EBITDA guidance increase to a range of $570 million to $610 million. This focus on efficiency is what is bridging the gap between market headwinds and profit expectations.

For a deeper dive into the company's valuation and strategic framework, check out the full post: Breaking Down Dana Incorporated (DAN) Financial Health: Key Insights for Investors. Finance: monitor the Q4 2025 closing of the divestiture and its impact on the debt-to-equity ratio.

Growth Opportunities

You're looking at Dana Incorporated (DAN) at a pivotal moment. The company is executing a clear, decisive pivot: selling its cyclical Off-Highway business to double down on the higher-growth, higher-margin on-highway markets-Light Vehicle and Commercial Vehicle. This isn't just a portfolio shuffle; it's a balance sheet overhaul that sets the stage for profitable growth, despite a near-term dip in headline revenue.

The strategic move to divest the Off-Highway division to Allison Transmission for $2.7 billion is a game-changer. This transaction, expected to close near the end of 2025, immediately strengthens the balance sheet. Here's the quick math: the net cash proceeds of approximately $2.4 billion will be used to pay down about $2 billion in debt, targeting a net leverage ratio of roughly 1x over the business cycle. A lighter balance sheet means more financial flexibility to invest in core growth areas.

The core growth driver is the global shift to vehicle electrification (e-Mobility). Dana is positioned well here, with a robust product portfolio that includes electric motors, inverters, and control systems. They are a leader in electrodynamic technologies, which is exactly where premium margins are found in the Light Vehicle and Commercial Vehicle segments. This focus is supported by continuous product innovations:

• Develop technologies for hybrid and electric vehicles.
• Launch the Dana TM4 SUM O® MD electric drive system, supporting architectures up to 800 volts.
• Expand aftermarket products, including gasket kits for next-generation EVs.

Plus, the Commercial Vehicle segment provides a steady base. Demand for trucks and buses remains resilient, buoyed by ongoing e-commerce logistics and infrastructure spending, which helps stabilize earnings even when the economy gets a little bumpy.

For the 2025 fiscal year, the financial outlook reflects this massive strategic change and cost discipline. The company has a $300 million total cost reduction plan in place through 2026, with $175 million in savings targeted specifically for 2025. This operational efficiency is key to boosting margins, even with the market headwinds.

The latest guidance, which accounts for the divestiture, projects fiscal year 2025 revenue to be in the range of $7.3 billion to $7.5 billion. More importantly, the revised Adjusted EBITDA outlook for 2025 is expected to range between $570 million and $610 million. This higher-than-expected profit guidance, even with lower sales volume due to the divestiture, shows the power of cost control and the focus on higher-margin core businesses. They are defintely moving the right levers.

Dana's long-term competitive advantage lies in its technological leadership in propulsion and energy-management solutions, supplying nearly every major vehicle manufacturer globally. This deep integration into the global automotive supply chain is hard to replicate. You can see their long-term vision in their commitment to sustainability, which includes offsetting 100% of their European purchased electricity emissions starting in January 2025 through a new solar power purchase agreement (PPA). For a deeper dive into the company's long-term direction, you should review their Mission Statement, Vision, & Core Values of Dana Incorporated (DAN).