AA  Alcoa Inc.

Exchange

NYSE

Sector

Capital Goods

Industry

Metal Fabrications

Market Cap.

8.77B

Vuru Grade

6.50/100

Current Price

$47.55
+1.01 (+2.17%)

Growth Price

$5.71
Overvalued by 88.00%

Company Metrics

  • P/E 54.1
  • P/S 0.83
  • P/B 1.44
  • EPS 0.88
  • Cash ROIC -0.10%
  • Cash Ratio 0.30
  • Dividend 0.36 / 1.25%
  • Avg. Vol. 4.12M
  • Shares 184.44M
  • Market Cap. 8.77B

Company Description

Alcoa, Inc. engages in the production and management of aluminum, fabricated aluminum, and alumina. The company operates in four segments: Alumina, Primary Metals, Flat-Rolled Products, and Engineered Products and Solutions. The Alumina segment engages in mining of bauxite, which is then refined into alumina. The Primary Metals segment produces aluminum. The Flat-Rolled Products segment engages in... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Alcoa Corp Stock Dips Are Perfect Opportunities for Bulls — Go Long
Investorplace.com - Oct 19, 2017
Coming into its earnings report, Alcoa Corp (NYSE:AA) was up 70% year-to-date. This made for a precariously perched stock. Such situations create rising wedges that if broken could carry downside momentum.
Alcoa Sees Global Aluminum Market Balancing on China's Curbs
Bloomberg - Oct 18, 2017
China will have a surplus of 1.8 million to 2 million metric tons of aluminum this year, Alcoa said in a presentation accompanying the earnings report.
Alcoa Inc. (AA) Dips 2.53% for October 19 - Equities.com
Alcoa misses on earnings but beats on revenue - MarketWatch
Alcoa ended September higher, despite the steep decline in aluminum prices in ...
Motley Fool - Oct 4, 2017
Aluminum producer Alcoa Corp's (NYSE:AA) stock ended September up around 6%. That may not sound like much until you consider that competitor Century Aluminum Company (NASDAQ:CENX) fell 15% in the month.
Nationwide Fund Advisors Invests $5.68 Million in ALCOA CORP (AA) Stock - The Ledger Gazette
Alcoa Corp (AA) EPS Estimated At $0.71 - BZ Weekly
Better Buy: Alcoa Inc. vs. Wheaton Precious Metals
Motley Fool - Sep 21, 2017
It's hard to compare an aluminum producer like Alcoa Inc. (NYSE:AA) to a precious metals company like Wheaton Precious Metals (NYSE:WPM) as the commodities they sell are inherently different.
Form 8-K Alcoa Corp For: Oct 13
StreetInsider.com - Oct 13, 2017
On October 13, 2017, Alcoa Corporation issued a press release announcing that it has reached an early termination agreement relating to the power contract for its curtailed Rockdale smelter in Texas.
Alcoa forecasts boost to annual earnings after terminating electric contract ... - Pittsburgh Post-Gazette
Alcoa terminates power contract at Texas smelter - Pittsburgh Business Times
Alcoa Corp (NYSE:AA) Performed Well in September Despite Weak Prices
Stock Traders Daily - Oct 13, 2017
The weak aluminum prices recorded in the last ten days of September had minimal impact on Alcoa Corp (NYSE:AA) stock, which ended the month 6% higher.
Alcoa Corp (AA) Seeing Increased Volatility in Session
The Business Union - Oct 19, 2017
Needle moving action has been spotted in Alcoa Corp (AA) as shares are moving today on volatility -1.80% or $-0.86 from the open.
Alcoa (AA) CEO Roy Harvey on Q3 2017 Results - Earnings Call Transcript
Seeking Alpha - Oct 19, 2017
Good afternoon, and welcome to the Alcoa Corporation Third Quarter 2017 Earnings Presentation and Conference Call. All participants will be in listen-only mode.
'Impressive': citizens react to long-awaited plan for former West Plant site
Maryville Daily Times - Sep 29, 2017
“Been a long time coming,” said Loren Bledsoe of Alcoa, who retired from ALCOA Inc. and “worked for a bit” at the West Plant that operated on the site from 1920 until 1989.
Alcoa Corp (AA) Stock Rating Lowered by Gabelli
The Ledger Gazette - Oct 17, 2017
Alcoa Corp logo Gabelli cut shares of Alcoa Corp (NYSE:AA) from a buy rating to a hold rating in a research report released on Wednesday, October 4th, Marketbeat reports.
Analysts See $0.71 EPS for Alcoa Corp (AA) - BZ Weekly
Alcoa Corp (NYSE:AA) Shares Sold by Caxton Associates LP - StockNewsTimes
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for AA to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate AA's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$47.55 Current Price

$5.71 Growth Price (DCF)

Overvalued by 88.00%


Growth Rate Assumed by Market: 500.00%


Future Free Cash Flow Growth Rate: 0.0%


Discount Rate: 15.0%


AA's most recent year of (normalized) free cash flow is negative. This is the base number for forward projections. This means that if you increase the growth rate, the amount of negative FCF grows, thereby decreasing the price.

Show Free Cash Flow numbers

$33.24 Book Price

Overvalued by 30.09%


Very Poor Cash Return on Invested Capital over the past 5 years

AA has failed to generate positive returns on its investments in buildings, projects and equipment. This could be due to poor management, lack of an economic moat or the capital intensive nature of the business.

AA has lost $0.10 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20122013201420152016
Free Cash Flow 236.00M 385.00M 455.00M 402.00M -715.00M
divided by
Invested Capital 32.38B 28.20B 29.98B 29.40B 13.07B
Cash ROIC 0.73% 1.37% 1.52% 1.37% -5.47%

Very Poor Return on Equity over the past 5 years

AA has shown an inability to deliver results for shareholders. This could be due to poor management, AA operating in a highly competitive industry, or having a weak business in general.

AA has generated a $5.25 loss for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20122013201420152016
Net Income 162.00M -2.24B 177.00M -197.00M -346.00M
divided by
Stockholders' Equity 13.20B 10.59B 12.31B 12.05B 5.65B
Return on Equity 1.23% -21.18% 1.44% -1.64% -6.12%

Mediocre Business Performance over the past 10 years

AA isn't a strong business and might be consistently attempting to fuel growth with debt or has trouble staying profitable. The lack of predictability in free cash flow should be concerning for the reliability of future earnings.

AA has been unable to consistently create value for shareholders.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Free Cash Flow -525.00M -2.18B -257.00M 1.25B 906.00M 236.00M 385.00M 455.00M 402.00M -715.00M

Weak Balance Sheet

AA's financial position is not ideal. The key is to check whether AA is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Cash 483.00M 762.00M 1.48B 1.54B 1.94B 1.86B 1.44B 1.88B 1.92B 853.00M
Current Assets 8.09B 8.15B 7.02B 6.87B 7.71B 7.70B 6.97B 8.27B 7.95B 3.18B
Total Assets 38.80B 37.82B 38.47B 39.29B 40.12B 40.18B 35.74B 37.40B 36.53B 16.74B
Current Liabilities 7.17B 7.28B 5.41B 5.24B 6.01B 5.94B 6.11B 5.54B 5.21B 2.82B
Total Liabilities 22.79B 26.09B 26.05B 25.68B 26.28B 26.98B 25.15B 25.09B 24.48B 11.09B
Stockholder' Equity 16.02B 11.74B 12.42B 13.61B 13.84B 13.20B 10.59B 12.31B 12.05B 5.65B
Current Ratio 1.13 1.12 1.30 1.31 1.28 1.30 1.14 1.49 1.53 1.13
TL-to-TA 0.59 0.69 0.68 0.65 0.65 0.67 0.70 0.67 0.67 0.66

Low or No Reinvestment of Profits over the past 10 years

AA has either been retaining a small amount of their earnings or has done so inconsistently. A lack of consistency could be due to AA operating at a loss or them having such a strong economic moat they feel comfortable spending profits on growth. Be wary of future prospects and if applicable, inspect the moat's sustainability.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Retained Earnings 13.04B 12.40B 11.02B 11.15B 11.63B 11.69B 9.27B 9.38B 8.83B -104.00M
Retained Earnings Growth - -4.90% -11.13% 1.17% 4.31% 0.52% -20.68% 1.15% -5.81% -101.18%

Loss Making Entity over the past 10 years

AA has been unable to maintain profitability. It's Costs of Sales have outstripped Revenue consistently. This is a huge red flag, unless the company has been investing heavily for the future. However, even that is dubious since accurately predicting the future of a company like that is extremely difficult.

$0.57 of every $100 of Revenue have been a loss, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Net Income 2.56B -74.00M -1.09B 392.00M 805.00M 162.00M -2.24B 177.00M -197.00M -346.00M
divided by
Revenue 30.75B 26.90B 18.44B 21.01B 24.95B 23.70B 23.03B 23.91B 22.53B 9.32B
Net Profit Margin 8.34% -0.28% -5.91% 1.87% 3.23% 0.68% -9.74% 0.74% -0.87% -3.71%

Inconsistent Gross Profit Margins over the past 10 years

AA has good gross profit margins, however inconsistency of these margins is a cause for concern. Look at reasons for this inconsistency to determine the likelihood of future sustainability.

$24.94 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Gross Profit 6.50B 4.73B 1.54B 3.84B 24.77B 3.21B 3.75B 4.77B 4.47B 1.42B
divided by
Revenue 30.75B 26.90B 18.44B 21.01B 24.95B 23.70B 23.03B 23.91B 22.53B 9.32B
Gross Margin 21.14% 17.57% 8.34% 18.27% 99.26% 13.56% 16.26% 19.95% 19.81% 15.24%

High Capital Intensity over the past 10 years

AA spends large amounts of capital buying new equipment or investing in new facilities to stay competitive. Over the long term, those costs may have to be fuelled by debt. Look at the growth of Shareholders' Equity to see if this strategy is having a positive or negative impact.

405.54% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Capital Expenditure 3.64B 3.41B 1.62B 1.02B 1.29B 1.26B 1.19B 1.22B 1.18B 404.00M
divided by
Net Income 2.56B -74.00M -1.09B 392.00M 805.00M 162.00M -2.24B 177.00M -197.00M -346.00M
Capital Expenditure Ratio 141.81% -4,612.16% -148.81% 258.93% 159.88% 778.40% -53.16% 688.70% -598.98% -116.76%

Inconsistent Dividend History over the past 10 years

AA has started distributing dividends in the past couple years or has recently suspended their dividend distribution. The reliability of future distributions is unclear.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Dividend Paid 590.00M 556.00M 368.00M 381.00M 388.00M 226.00M 241.00M 281.00M 329.00M -
divided by
Shares Outstanding 868.47M 818.00M 935.77M 1.03B 1.16B 1.08B 1.07B 1.18B 1.26B 183.00M
Dividend Paid Per Share 0.68 0.68 0.39 0.37 0.33 0.21 0.23 0.24 0.26 -
Price at Year End 34.05 10.17 15.96 15.04 8.62 8.50 10.53 15.85 9.96 28.08
Dividend Yield 2.00% 6.68% 2.46% 2.47% 3.88% 2.47% 2.14% 1.50% 2.62% -

History of Stock Buybacks over the past 10 years

AA has some history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Shares Outstanding 868.47M 818.00M 935.77M 1.03B 1.16B 1.08B 1.07B 1.18B 1.26B 183.00M
Stock Bought Back - 6.17% -12.59% -8.71% -11.71% 7.90% 0.56% -9.32% -6.27% 587.98%
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