AA Investment Analysis Report & Stock Research, Alcoa Inc.

Alcoa Inc. (AA)

AA Stock Report

2-Year Price History

View Larger AA Chart
NYSE:AA
$13.39
(3/15 2:30PM)
-1.5%
Open$13.57 Mkt Cap$13.9 Billion
High$13.6 52Wk High$17.60
Low$13.37 52Wk Low$7.03
Volume15.8 Million Avg Vol 10D31.7 Million

Ockham's Rating/Recommendation Summary

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AA Revenue

As a value investing shop, we are interested in seeing how AA's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 1.29x and the low end of the range at 0.64x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for AA of 0.75x is quite a bit below what we consider a normal Price to Sales ratio for this stock. Given normal conditions and a price of $13.60, AA is 23% below where we would expect to see it. This will beneficially factor into our final analysis of AA as it is not often that this stock sinks to these levels.

AA Cash Earnings

When reviewing a company and their prospects for success, it is necessary to analyze their ability to generate positive Cash Earnings. This is a vital component to our analysis, because as a long term investment research firm, there are few factors more closely tied to the valuation of a company as Cash Earnings. In the case of AA, it appears that either the current estimate for Cash Earnings is negative or AA is not likely to generate positive Cash Earnings based upon their prior performance in the last several quarters. Remember that Cash Earnings is not the only way to value a company's potential, but in our analysis it is the most important. Thus, for our analysis AA receives a negative score from a Cash perspective. At Ockham, we are fond of saying "Cash is King," and in this case the company is not generating any. If a company is not able to generate a profit then there is no reason to invest in them. Unless of course you believe in the story, and hope it will eventually lead to a profitable enterprise.

AA Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from AA against the historic high and low levels over an available data range. Because AA has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In AA’s case, the estimated annual dividend is $0.12 producing a current dividend yield of 0.88%. The highest dividend yield from AA in recent history was 10.00% while the lowest dividend yield was 0.68%. While it is quite common for a growth stock to pay no dividend at all, but for a mature company such as AA that has a history of paying dividends it is disappointing to see their dividend yield drop so significantly. At this time, the current dividend yield is 83.52% below the median yield.

Peer Comparison

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Alcoa Inc. Industry Grouping

(3/12/2010)
Company Ticker Market Cap (Ml) Latest
Price
Price/Cash Earnings Price/Sales 5-Yr. Rev.
Growth Rate
5-Yr.
Avg. ROE.
Current 10-Yr. Range* Current 10-Yr. Range*
Peer Company Averages (not including AA) 46.73 3.08 » 61.17 2.98 0.64 » 5.15 17.99% 20.35%
*10 year range does not include current year values
Sterlite Industries (India) Limited Shs American Deposit Receipt Repr 1 share SLT $15.2 Billion $18.13 28.78 3.00 » 31.90 5.19 0.52 » 5.76 n/a 27.30%
Nucor Corp. NUE $14.3 Billion $45.28 52.05 3.18 » 58.71 1.27 0.33 » 1.44 -0.33% 23.77%
Aluminum Corp. of China Ltd ADS Repr 25 Shs Series H ACH $14.1 Billion $26.00 123.81 2.23 » 156.14 1.95 0.35 » 4.72 31.98% 17.80%
Alcoa Inc. AA $13.9 Billion $13.60 -1.00 4.69 » 30.88 0.75 0.13 » 1.69 4.58% 10.14%
Peabody Energy Corp. BTU $13.1 Billion $48.69 14.94 2.48 » 26.72 2.18 0.32 » 3.69 10.61% 20.14%
Cameco Corp. CCJ $11.1 Billion $28.21 14.11 4.54 » 32.37 4.33 1.66 » 10.16 29.68% 12.76%
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5:57P, Mar. 11,2010 AA $13.65 Alcoa Inc.
Fast Money

News Breaking on Alcoa Inc. on Fast Money

Staying informed on the news is invaluable for investors, and RazorWire has captured a recently discussion on AA from Fast Money.

At the current price, value investors will want to look elsewhere for a buying opportunity as this stock has heated up and is currently Overvalued. Ranking all stocks in terms of news coverage offers some interesting data. In the case of AA, it is getting significantly more attention in recent news coverage than we are used to seeing. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey.

“… grasso's warning that all stocks will go up, a short certainly of ALCOA. > > best buy. > > karen? > > xpi. > > pete? > > …”

3:44P, Mar. 11,2010 AA $13.60 Alcoa Inc.
Closing Bell

Notice a Discussion Covering AA Appeared Recently in the Financial News

As always, the latest news on AA is available to Ockham clients through RazorWire, and it was mentioned recently on Closing Bell.

In comparison to the other stocks that we follow, Alcoa Inc. has seen more discussion in relation to its normal ranking among the group. Be aware that the news sources we track are focusing on this stock more often these days. Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey. As of this week's report, we have an Overvalued valuation on AA because the price has gotten too high to be justified by the fundamentals.

“… ALCOA on the day -- home depot having a very good day. Walmart, hewlett-packard and cisco all trading higher and even though the dow's only up 27 points. …”

6:08P, Mar. 09,2010 AA $13.64 Alcoa Inc.
Mad Money

Mad Money Talks Cash Flow and AA

The latest cash flow information from AA was covered on Mad Money recently, and investors should be interested in anything that affects their ability to generate cash.

At the current price, value investors will want to look elsewhere for a buying opportunity as this stock has heated up and is currently Overvalued. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey. Ranking all stocks in terms of news coverage offers some interesting data. In the case of AA, it is getting significantly more attention in recent news coverage than we are used to seeing.

“… Finally there's ALCOA. I like the cash flow. I like the aluminum story but I have given up on the stock down 15. 2% for the year. …”

2:02P, Mar. 09,2010 AA $13.70 Alcoa Inc.
Fox Business

Analyst Opinion on AA the Topic for Fox Business

Wall Street analysts can have a huge affect on stocks, and today Fox Business talked about an analysts' opinion in relation to AA.

When looking at our entire coverage universe and ranking stocks by the attention they receive on RazorWire, it is clear that Alcoa Inc. has been talked about more than normal recently. The Motley Fool CAPS data suggests that investors believe Alcoa Inc. will beat the market in the foreseeable future. At Ockham, we are not advising buying Alcoa Inc. at the current price level because according to our methodology it is not supported by the fundamentals.

“… ALCOA representation some of the material stocks are lagging. Looking at some of the retailer's the name like and taylor, ubs which is now upgrading their price target $22 in ... …”

3:58P, Mar. 05,2010 AA $13.85 Alcoa Inc.
Countdown to the Closing Bell

See More News on AA from Countdown to the Closing Bell

News has broken via the television and viral blogs regarding AA, so investors should take an interest in learning what was said.

As of this week's report, we have an Overvalued valuation on AA because the price has gotten too high to be justified by the fundamentals. When taking into account the amount of news coverage each stock normally sees as a percentage of the total, Alcoa Inc. has actually sunk a bit in comparison to the others. Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey.

“… the green. ALCOA and u.S. Field. Oil is back above $81. Gold as well. It was pretty much flat. 4 gold stocks moved to the …”

3:52P, Mar. 05,2010 AA $13.87 Alcoa Inc.
Closing Bell

Stay Current on AA's News on Closing Bell

As always, the latest news on AA is available to Ockham clients through RazorWire, and it was mentioned recently on Closing Bell.

When taking into account the amount of news coverage each stock normally sees as a percentage of the total, Alcoa Inc. has actually sunk a bit in comparison to the others. As of this week's report, we have an Overvalued valuation on AA because the price has gotten too high to be justified by the fundamentals. Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey.

“… ALCOA, home depotacious new high for home depot that you're look at there. Walmart doing well. And hewlett. Cisco, I believe that's a new high for cisco. …”

11:15A, Mar. 03,2010 AA $13.44 Alcoa Inc.
The Call

Earnings News Regarding Alcoa Inc. Noted on The Call

Whenever a reliable source like The Call talks about earnings or news on earnings, we think it warrants bringing attention to it.

At the current price, value investors will want to look elsewhere for a buying opportunity as this stock has heated up and is currently Overvalued. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey. We noticed recently that in comparison to all other stocks we analyze in the news; AA has received less coverage from the financial media in business television and blogs.

“… 1 billion is bigger than ALCOA and closing in on heinz and kroger. It trades at 11 times estimated sales and 47 times this year's estimated earnings per share of > > …”

3:02P, Mar. 02,2010 AA $13.33 Alcoa Inc.
Closing Bell

Delevoping Economies and Where AA Fits In on Closing Bell

For growth, there is nowhere growing more rapidly than emerging markets. Recently, Closing Bell talked about emerging markets and their impact on Alcoa Inc..

When taking into account the amount of news coverage each stock normally sees as a percentage of the total, Alcoa Inc. has actually sunk a bit in comparison to the others. As of this week's report, we have an Overvalued valuation on AA because the price has gotten too high to be justified by the fundamentals. Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey.

“… Rio tinto, bhp billiton, ALCOA and ak steel. Coal companies are up on a deal speculation of massey and those gains all across the board today. …”

3:02P, Feb. 25,2010 AA $13.22 Alcoa Inc.
Closing Bell

AA Gets Mentioned in the Financial Media

The latest news from business television and influential blogs is always available through Ockham's RazorWire, and this news is in relation to Alcoa Inc..

At the current price, value investors will want to look elsewhere for a buying opportunity as this stock has heated up and is currently Overvalued. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey. From a news flow perspective, there is nothing out of the ordinary in where AA ranks in comparison to other stocks we follow.

“… ALCOA actually went positive and is now the best performer in the dow and that is true with a -- so many commodity names at this hour. …”

3:01P, Feb. 25,2010 AA $13.23 Alcoa Inc.
Closing Bell

See More News on AA from Closing Bell

The latest news from Closing Bell on AA is available through Ockham's news analytics platform RazorWire.

In comparing news flow statistics for the various companies we follow through RazorWire, we can tell you that AA ranks just about where it normally does. The Motley Fool CAPS data suggests that investors believe Alcoa Inc. will beat the market in the foreseeable future. At Ockham, we are not advising buying Alcoa Inc. at the current price level because according to our methodology it is not supported by the fundamentals.

“… ALCOA managed to change direction which was interesting. Take a look at the charts and show you where we stand as we approach this final stretch here on wall street. …”

View All Alcoa Inc. Stock News

Key Fundamentals

AA - Alcoa Inc. Fundamentals
Price (3/15 2:30PM) $13.39
Volume (3/15 2:30PM) 15.8 Million
Last Close Price $13.60
10 Day Average Volume 31.7 Million
13 Week Price Range $12.26 - $17.60
52 Week Price Range $7.03 - $17.60
LTM Revenue $18.4 Billion
 
Shares Outstanding (12/2009) 1.0 Billion
Market Capitalization $13.9 Billion
Shares Held By Institutions 710.6 Million
Institutional Holders 895
% Shares Held By Institutions 72.90%
Earnings Per Share (EPS) ($1.23)
P/E Ratio n/a
Book Value Per Share $12.92
 
Gross Margin 8.10%
Annual Dividend 0.12
Dividend Yield 0.90%
Beta 2.11
Fiscal Year Ends December

About Alcoa Inc.

Alcoa Inc. is considered to operate in the Basic Materials sector. They specifically operate in the Aluminum business segment contained within the Metals & Mining industry.

The Company is engaged in the production and management of primary aluminum, fabricated aluminum, and alumina combined, through its active and growing participation in all major aspects of the industry.