Is Alcoa (AA) Stock Undervalued Right Now?
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
Alcoa (AA) is a stock many investors are watching right now. AA is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 7.19 right now. For comparison, its industry sports an average P/E of 10.51. AA's Forward P/E has been as high as 1,445.82 and as low as -71.68, with a median of 8.52, all within the past year.
We should also highlight that AA has a P/B ratio of 1.35. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 2.25. Over the past year, AA's P/B has been as high as 1.58 and as low as 0.40, with a median of 0.82.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. AA has a P/S ratio of 0.62. This compares to its industry's average P/S of 0.63.
Finally, we should also recognize that AA has a P/CF ratio of 11.25. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 14.04. Over the past year, AA's P/CF has been as high as 60.31 and as low as 6.93, with a median of 12.19.
These are only a few of the key metrics included in Alcoa's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, AA looks like an impressive value stock at the moment.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Alcoa Corp. (AA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
