Should Value Investors Buy Alcoa (AA) Stock?
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.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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.
One stock to keep an eye on is Alcoa (AA). AA is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 4.34, while its industry has an average P/E of 6.21. Over the past year, AA's Forward P/E has been as high as 11.74 and as low as 4.34, with a median of 8.36.
We also note that AA holds a PEG ratio of 0.50. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. AA's PEG compares to its industry's average PEG of 0.71. AA's PEG has been as high as 0.92 and as low as 0.19, with a median of 0.85, all within the past year.
Another notable valuation metric for AA is its P/B ratio of 1.60. 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 attractive against its industry's average P/B of 2.09. Within the past 52 weeks, AA's P/B has been as high as 2.83 and as low as 1.09, with a median of 1.67.
Finally, we should also recognize that AA has a P/CF ratio of 7.49. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. AA's current P/CF looks attractive when compared to its industry's average P/CF of 8.27. Within the past 12 months, AA's P/CF has been as high as 16.15 and as low as 5.44, with a median of 8.77.
If you're looking for another solid Metal Products - Distribution value stock, take a look at Mitsui & Co. (MITSY). MITSY is a # 1 (Strong Buy) stock with a Value score of A.
Shares of Mitsui & Co. currently holds a Forward P/E ratio of 5.68, and its PEG ratio is 0.27. In comparison, its industry sports average P/E and PEG ratios of 6.21 and 0.71.
Over the last 12 months, MITSY's P/E has been as high as 9.39, as low as 5.03, with a median of 6.54, and its PEG ratio has been as high as 0.96, as low as 0.17, with a median of 0.28.
Mitsui & Co. also has a P/B ratio of 0.89 compared to its industry's price-to-book ratio of 2.09. Over the past year, its P/B ratio has been as high as 0.99, as low as 0.76, with a median of 0.84.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Alcoa and Mitsui & Co. are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AA and MITSY feels like a great value stock at the moment.
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