AA  Alcoa Inc.

Exchange

NYSE

Sector

Capital Goods

Industry

Metal Fabrications

Market Cap.

6.31B

Vuru Grade

6.50/100

Current Price

$34.48
+0.16 (+0.47%)

Growth Price

$11.62
Overvalued by 66.29%

Company Metrics

  • P/E 19.31
  • P/S 0.67
  • P/B 1.11
  • EPS -2.19
  • Cash ROIC 1.56%
  • Cash Ratio 0.37
  • Dividend 0.36 / 1.25 %
  • Avg. Vol. 4.39M
  • Shares 1.26B
  • Market Cap. 6.31B

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

Will Alcoa Corp. Pay a Dividend in 2017?
Motley Fool - Feb 24, 2017
It's messy at Alcoa Corp. (NYSE:AA) right now because the aluminum industry giant just separated from its former specialty parts business, Arconic Inc. (NYSE:ARNC).
Why the ASX is King of the Hill for Mining Investments - MiningFeeds.com
Why You Should (and Shouldn't) Buy Alcoa Inc.
Motley Fool - Feb 15, 2017
Despite reporting a big loss in fourth-quarter earnings last month, Alcoa (NYSE:AA) continues to shine as investors look to its adjusted earnings for indications on what the bauxite, alumina, and aluminum producer can yet accomplish.
Insider Trading at Alcoa Corp.? - BBNS
BRIEF-Alcoa corp -committee approved increase to the base salary of CFO
Reuters - Feb 24, 2017
BUENOS AIRES, Feb 24 A strike called by Argentine soccer players over unpaid wages overshadowed Friday's meeting of the country's Football Association (AFA), which was aimed at paving the way for the resumption of the league championships.
3 Things Alcoa Corp Needs to Prove in 2017
Motley Fool - Feb 2, 2017
There's no way around the fact that 2016 was a year of change for Alcoa. It culminated with the breakup of Alcoa and Arconic in early November. That means the fourth quarter was the first full period in which Alcoa's results were "purely" based on its ...
Elliott Seeks Ouster of CEO at Former Alcoa Unit Arconic - Bloomberg
Arconic investors urge for ousting of CEO Klaus Kleinfeld, months after Alcoa ... - MarketWatch
3 Key Metrics for Alcoa Corp Investors to Focus On
Motley Fool - Feb 9, 2017
Alcoa Corp (NYSE:AA), which recently spun-off its advanced manufacturing arms, became an old fashioned aluminum manufacturer once again in late 2016.
Here Is Why Aluminum Miner Alcoa Is an Excellent Stock to Buy Now - TheStreet.com
Arconic's Park Avenue Digs Are Activist Catnip - Bloomberg
Blog Coverage Arconic Announced Sale of 60% Stake in Alcoa Corp. for $890 Million
Yahoo Finance - Feb 16, 2017
LONDON, UK / ACCESSWIRE / February 16, 2017 / Active Wall St. blog coverage looks at the headline from Arconic, Inc. (NYSE: ARNC) and Alcoa Corp. (NYSE: AA). Arconic announced on February 15, 2017, that the Company has sold off majority stake in ...
Arconic sells 60 percent stake in Alcoa for $890 million - Reuters
Arconic Sells Most of Its Alcoa Stake Amid Battle With Elliott - Wall Street Journal (subscription)
Alcoa Inc. (AA) Dips 6.23% for February 23
Equities.com - Feb 23, 2017
Among the S&P 500's biggest fallers on Thursday February 23 was Alcoa Inc. (AA). The stock experienced a 6.23% decline to $34.32 with 7.13 million shares changing hands.
Alcoa Chief Executive Officer Roy Harvey to Present at BMO Capital Markets 26
Business Wire (press release) - Feb 20, 2017
NEW YORK--(BUSINESS WIRE)--Alcoa Corporation (NYSE:AA) today announced that Chief Executive Officer Roy Harvey will present at the BMO Capital Markets 26th Global Metals & Mining Conference in Hollywood, Florida, on Tuesday, February 28 at ...
Alcoa Can Gain 25%, JPMorgan Says
Barron's (blog) - Feb 2, 2017
(AA) Overweight with a $46 December 2017 price target while we previously had a Neutral rating and $29 price target for Alcoa, Inc. (the pre-spin company that was comprised of Alcoa Corp. and Arconic (ARNC)). We think AA is in a much better position ...
Analyst Upgrades – Alcoa Corp. (NYSE:AA) Stock Gets Upgraded By JP Morgan ... - Market Exclusive
Alcoa Corp. (AA) Shares Active after Upgrade at JP Morgan Chase & Co - BNB Daily (blog)
Analyst Upgrades – Alcoa Corp. (NYSE:AA) Stock Gets Upgraded By Bank of ...
Market Exclusive - Feb 3, 2017
Today, Alcoa Corp. (NYSE:AA) stock received an upgrade by Bank of America Corporation from Neutral to Buy with a price target of $45.00.
The Alcoa Corp. (AA) Stock Rating Reaffirmed by Berenberg Bank - DailyQuint
Alcoa Corp. (AA) Upgraded by JP Morgan Chase & Co to Overweight - Sports Perspectives
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.

$34.48 Current Price

$11.62 Growth Price (DCF)

Overvalued by 66.29%


Growth Rate Assumed by Market: 59.91%


Future Free Cash Flow Growth Rate: 0.0%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$11.49 Book Price

Overvalued by 66.68%


Poor Cash Return on Invested Capital over the past 5 years

AA has been unable to consistently generate sufficient returns from 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 only created $1.56 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20112012201320142015
Free Cash Flow 906.00M 236.00M 385.00M 455.00M 402.00M
divided by
Invested Capital 32.17B 32.38B 28.20B 29.98B 29.40B
Cash ROIC 2.82% 0.73% 1.37% 1.52% 1.37%

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 $2.87 loss for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20112012201320142015
Net Income 805.00M 162.00M -2.24B 177.00M -197.00M
divided by
Stockholders' Equity 13.84B 13.20B 10.59B 12.31B 12.05B
Return on Equity 5.81% 1.23% -21.18% 1.44% -1.64%

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
2006200720082009201020112012201320142015
Free Cash Flow -634.00M -525.00M -2.18B -257.00M 1.25B 906.00M 236.00M 385.00M 455.00M 402.00M

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
2006200720082009201020112012201320142015
Cash 506.00M 483.00M 762.00M 1.48B 1.54B 1.94B 1.86B 1.44B 1.88B 1.92B
Current Assets 9.16B 8.09B 8.15B 7.02B 6.87B 7.71B 7.70B 6.97B 8.27B 7.95B
Total Assets 37.18B 38.80B 37.82B 38.47B 39.29B 40.12B 40.18B 35.74B 37.40B 36.53B
Current Liabilities 7.28B 7.17B 7.28B 5.41B 5.24B 6.01B 5.94B 6.11B 5.54B 5.21B
Total Liabilities 22.55B 22.79B 26.09B 26.05B 25.68B 26.28B 26.98B 25.15B 25.09B 24.48B
Stockholder' Equity 14.63B 16.02B 11.74B 12.42B 13.61B 13.84B 13.20B 10.59B 12.31B 12.05B
Current Ratio 1.26 1.13 1.12 1.30 1.31 1.28 1.30 1.14 1.49 1.53
TL-to-TA 0.61 0.59 0.69 0.68 0.65 0.65 0.67 0.70 0.67 0.67

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
2006200720082009201020112012201320142015
Retained Earnings 11.07B 13.04B 12.40B 11.02B 11.15B 11.63B 11.69B 9.27B 9.38B 8.83B
Retained Earnings Growth - 17.83% -4.90% -11.13% 1.17% 4.31% 0.52% -20.68% 1.15% -5.81%

Highly Competitive Industry over the past 10 years

It's likely that AA is in an industry with low barriers to entry, spurring high competition. If Gross Margins are at least satisfactory, it's likely AA invests heavily in R&D and Sales, General & Administrative expenses.

Only $0.55 of every $100 of Revenue have been profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Net Income 2.25B 2.56B -74.00M -1.09B 392.00M 805.00M 162.00M -2.24B 177.00M -197.00M
divided by
Revenue 30.38B 30.75B 26.90B 18.44B 21.01B 24.95B 23.70B 23.03B 23.91B 22.53B
Net Profit Margin 7.40% 8.34% -0.28% -5.91% 1.87% 3.23% 0.68% -9.74% 0.74% -0.87%

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.

$25.74 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
2006200720082009201020112012201320142015
Gross Profit 7.06B 6.50B 4.73B 1.54B 3.84B 24.77B 3.21B 3.75B 4.77B 4.47B
divided by
Revenue 30.38B 30.75B 26.90B 18.44B 21.01B 24.95B 23.70B 23.03B 23.91B 22.53B
Gross Margin 23.24% 21.14% 17.57% 8.34% 18.27% 99.26% 13.56% 16.26% 19.95% 19.81%

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.

361.68% 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
2006200720082009201020112012201320142015
Capital Expenditure 3.20B 3.64B 3.41B 1.62B 1.02B 1.29B 1.26B 1.19B 1.22B 1.18B
divided by
Net Income 2.25B 2.56B -74.00M -1.09B 392.00M 805.00M 162.00M -2.24B 177.00M -197.00M
Capital Expenditure Ratio 142.39% 141.81% -4,612.16% -148.81% 258.93% 159.88% 778.40% -53.16% 688.70% -598.98%

Very Strong Dividend History over the past 10 years

AA has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests AA is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Dividend Paid 524.00M 590.00M 556.00M 368.00M 381.00M 388.00M 226.00M 241.00M 281.00M 329.00M
divided by
Shares Outstanding 873.93M 868.47M 818.00M 935.77M 1.03B 1.16B 1.08B 1.07B 1.18B 1.26B
Dividend Paid Per Share 0.60 0.68 0.68 0.39 0.37 0.33 0.21 0.23 0.24 0.26
Price at Year End 27.20 34.05 10.17 15.96 15.04 8.62 8.50 10.53 15.85 9.96
Dividend Yield 2.20% 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
2006200720082009201020112012201320142015
Shares Outstanding 873.93M 868.47M 818.00M 935.77M 1.03B 1.16B 1.08B 1.07B 1.18B 1.26B
Stock Bought Back - 0.63% 6.17% -12.59% -8.71% -11.71% 7.90% 0.56% -9.32% -6.27%
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