Stocks’ Details

Dana Incorporated

Recognition for DAN: Dana Incorporated (NYSE: DAN) provides power-conveyance and energy-management solutions for vehicles and machinery. The market capitalization of the company as on 05 January 2021, stood at ~$2.92 billion. As per a recent update, the company was named as one of America's most responsible companies in 2021, by Newsweek magazine.

Q3FY20 Financial Update: The company delivered a decent financial performance in the given quarter, with an increase in sales by $900 million to ~$2 billion, when compared with Q2FY20. It reported an adjusted EBITDA of $201 million, with a margin of 10.1% during the same period. However, there was a decrease in net income to $45 million in Q3FY20, compared to $111 million during the pcp. This can be attributed to reduced sales due to the impact of the COVID-19 pandemic.

Q3FY20 Financial Performance (Source: Company Reports)

Outlook: The company has observed decent light truck and agriculture demand during Q3FY20 and expects this trend, going forward. It will further focus on strengthening its e-Propulsion capabilities. It provided full-year 2020 sales guidance of ~$6.650 to $6.950 billion.

Stock Recommendation:  The company is positive on its prospects with the recovery in vehicle demand and improved business conditions across its global end markets. DAN gave a return of 46.73% in the past three months and a return of 77.9% in the past six months. The stock of DAN is trading close to its 52 weeks’ trading high of $20.66. On a technical front, the stock of DAN has a support level of $18.63 and a resistance level of $23.56. In Q3 FY20, debt to equity ratio stood at 1.69x, much higher than the industry median of 0.55x. On a TTM basis, the stock of DAN is trading at a P/E multiple of 36.3x, higher than the industry average (Automobiles & Auto Parts) of 6.6x. Considering the steep price movements in the past months, high debt to equity ratio and current trading level, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the closing price of $20.22, up by 5.97% as on January 05, 2021.

Fulgent Genetics, Inc.

Partnership Extension: Fulgent Genetics, Inc. (NASDAQ: FLGT) is a technology company that provides comprehensive testing solutions through its platform. The market capitalization of the company as on 05 January 2021, stood at ~$1.55 billion. As per a recent update, the company was selected to give its support to the DOE public school testing managed by the NYC Test and Trace Corps, for 2021.

Q3FY20 Financial Update: The company reported a significant rise in revenue to $101.7 million during the quarter, with an increase of 880% Y-o-Y. The growth was aided by the record billable tests during the period. There was a sequential growth of 57% from the Non- COVID revenue segment.

Q3FY20 Financial Performance (Source: Company Reports)

Outlook: On the back of decent financial performance in Q3FY20, the company has provided full-year 2020 revenue guidance to $300 million, an increase of 28% compared to previous guidance of $235 million. The company has witnessed accelerating demand for its COVID-19 tests.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The company believes that it is well-positioned to meet the demand for COVID-19 testing and have capacity to run more than 60,000 test per day. FLGT gave a return of 42.96% in the past three months and a return of 46.15% in the past one month. The stock of FLGT is trading close to its 52-week high of $66. On a technical front, the stock of FLGT has a support level of $51.88 and a resistance level of $66.2. The company reported an increase in asset to equity ratio to 1.32x in Q3FY20, from 1.10x in Q2FY20. We have valued the stock using an EV/Sales multiple based illustrative relative valuation and have arrived at a target price with a correction of low double-digit (in % terms). For the purpose, we have taken peers such as Avantor Inc (NYSE: AVTR), Thermo Fisher Scientific Inc (NYSE: TMO), InfuSystem Holdings Inc (NYSE: INFU), to name a few. Considering the current trading levels, volatile price movement, and valuation, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the closing price of $63.65, up by 7.34% as on January 05, 2021.

Triterras, Inc.

Filing of Lawsuit: Triterras, Inc. (NASDAQ: TRIT) is a fintech company for trade finance. The market capitalization of the company as on 05 January 2021, stood at ~$910.16 million. As per a recent update, a lawsuit has been filed against the company and few of its executives with regards to the violations of the Securities Exchange Act of 1934.

3QFY20 Estimated Results: The company has estimated its revenue at ~$17 million and net income at ~$10 million, during the quarter. Based on the quarterly estimates, it expects YTD revenues at ~$40.7 million and net income at ~$24.2 million.

The company generated pro-forma sales of $16.89 million during the year ended December 31, 2019. There was a profit of $12.76 million during the period. Triterras, Inc was formed as a result of the merger between Triterras Fintech Pte. Ltd. and Netfin Acquisition Corp. The parties have announced that they have closed the business combination on November 10, 2020. As per this merger, each Class A ordinary share of Netfin will be exchanged for one Class A ordinary share of Triterras, Inc.

Pro Forma FY19 Financial Performance (Source: Company Reports)

Outlook: The company remains optimistic about its performance for FY21 and is expecting increased volumes in its Kratos platform.

Stock Recommendation: TRIT gave a negative return of 13.38% in the past 1 week and a negative return of 24.13% in the past one month. The stock of TRIT is trading below the average of its 52-week trading range of $15.45-$7.70. The stock touched a 52-week low price of $7.70 on December 17, 2020 on account of its affiliate, Antainium Resources (formerly known as Rhodium Resources) receiving statutory demand for payment from one of its creditors. Rhodium is a key client of the company and is also responsible for the influx of customers in TRIT’s Kratos platform. On a technical front, the stock of TRIT has a support level of $9.88 and a resistance level of $11.28. On a TTM basis, the stock of TRIT is trading at an EV/Sales multiple of 18.4x, higher than the industry median (Financials) of 1.9x. Considering the ongoing cases against the company, limited history of operations, volatility in stock price and the key risks associated with the business, we give a ‘Sell’ rating on the stock at the closing price of $10.94, up by 6.84% as on January 05, 2021, for the earlier 'Speculative Buy' recommendation in Netfin Acquisition Corp.- one of the merged entities.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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