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Alcoa Fundamentals Compared to Other Aluminum Producers

By Edited Nov 13, 2013 0 0

Alcoa, Inc (NYSE:AA) is a large aluminum miner, refiner, smelter and recycler in the US. It is one of the most actively traded stocks in the US and is part of the DOW Jones Composite. It is well-known for being the company to kick off each earnings season. The popularity and liquidity of the stock gathers interest from beyond those investors who are just interested in investing in an aluminum company. I will compare Alcoa's key fundamental statistics to other aluminum producers:


Alumina Limited NYSE:AWC
Aluminum Corporation of China Limited NYSE:ACH
Century Aluminum Co NASDAQ:CENX
Kaiser Aluminum Corp NASDAQ:KALU
Noranda Aluminum Holding Corp NYSE:NOR



Price to Earnings

Alcoa does not have earnings at the moment so it cannot be included in the P/E ranking. In fact, half aluminum producers have no earnings so they are relying on cutting costs or increases to the price of aluminum in order to pull a profit.

NOR................3.2
KALU............26.5
Industry...141.1
AWC...........330.4


Price to Book

The Price to Book ratio is a useful metric to judge the aluminum industry on as most of the players have their own mine of which will have some sort of minimum intrinsic value should the companies decide to or be forced into liquidation. Using this metric AA does very well compared to the other producers.

KALU...........1.1
AA................1.1
CENX...........1.3
Industry...1.4
ACH.............1.7
AWC............1.8
NOR............4.2


Price to Cash Flow

The price to cash flow metric is important since half of the producers aren't making money. It enables us to see which companies are at least making cash even if accounting earnings are not negative. Despite AWC eking out with a positive P/E, its P/CF is negative and cannot be ranked. AA does fairly strongly on this metric as well.

NOR..............3.2
AA...............11.2
Industry...14.9
ACH.............14.9
KALU...........17.4
CENX...........46.7


Gross Margin %

The gross margin % shows how much margin a company makes off of their sales less their cost of goods sold. Aluminum producers with a higher margin can make more money at current prices and are safer plays if the aluminum prices dropped, but those with thin margins can have leveraged increases in their earnings if the aluminum price takes off. An example of that would be CENX which hit as high as $80 before the market crash in 2008. Note that even though AA has the highest gross margin, their earnings are still negative thanks to cost overruns elsewhere. AWC is not ranked.

AA................15.64%
KALU...........14.37%
NOR.............11.57%
Industry...11.48%
CENX............7.71%
ACH..............6.83%


Debt to Capital

Debt to Capital is an important metric to know because if there is another crash in aluminum prices you will want to know who may run into financial problems. Those companies with lower debt to capital are at less risk.

KALU.............1%
AWC............17%
CENX...........22%
Industry...31%
AA...............39%
ACH............54%
NOR............91%


Dividend %

This is a rank of the dividend payout as a % of each company's stock price. Thos companies that do pay dividends run only about 1-2%. There are great resources for finding high-paying dividend stocks available on the web.

AWC............1.91%
KALU..........1.88%
Industry...1.21%
AA...............0.85%


Basedon these metrics AA looks like a good but not outstanding play when compared to other producers. If it can get its costs in order so that it reaps profits that its gross margin implies that it should, it would become one of the most undervalued plays in the industry given its low price to book value without a crippling amount of debt like NOR.

My investment blog

Disclaimer: I do not own any of these stocks listed. All data was taken from TD Waterhouse Research Services and Yahoo Finance as of December 8, 2010.

See a similar analysis for the oil and gas industry here

Refer to my other investment articles if you are interested in learning about:

Junior Gold Explorers

Biotech Stocks and Beaten Down Biotech Stocks

Natural Gas

Canadian Bank Stocks

Penny Stocks






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