Alcoa's Shares Had An Impressive Run, But Now Fairly Valued After Pullback

Aug. 18, 2022 1:00 PM ETAlcoa Corporation (AA)8 Comments
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Summary

  • Alcoa Corporation is the world's leading producer of primary and fabricated aluminum and is a leading miner of bauxite and refiner of alumina.
  • Though the company is diversified across a variety of end markets - including aerospace, automotive, and packaging - the firm is tied to the volatile and unpredictable nature of aluminum prices.
  • Higher costs for energy and raw materials will weigh on its aluminum and alumina operations in the current quarter, but its bauxite segment is well positioned for profitable growth.
  • Alcoa initiated a quarterly dividend program in 2021, though the company has suspended and cut its payout numerous times in the past.
  • Shares of Alcoa are trading about in line with our fair value estimate at this time, but what a fantastic recovery the firm has experienced since the March 2020 COVID-19 bottom! We're keeping a close eye on shares.

Sign of Alcoa and Arconic on the building in Pittsburgh, Pennsylvania, USA. Alcoa Corporation is an American industrial corporation.

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By The Valuentum Team

Alcoa Corporation (NYSE:AA) is the world's leading producer of primary and fabricated aluminum and is a leading miner of bauxite and refiner of alumina. Though the company is diversified across a variety of end markets - including

Investment Considerations

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Adjusted Return on Invested Capital

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Cash Flow Generation

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Valuation Assumptions

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Valuation Breakdown

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Range of Potential Outcomes

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Dividend Cushion Ratio Deconstruction

Dividend Cushion Ratio Deconstruction (Image Source: Valuentum)

Alcoa's shares have surged since the COVID-19 panic bottom, but they have pulled back considerably in recent months.

Alcoa's shares have surged since the COVID-19 panic bottom, but they have pulled back considerably in recent months. (Image Source: TradingView)

This article was written by

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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, BITO, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson's household owns shares in HON, DIS, HAS, NKE. Some of the other securities written about in this article may be included in Valuentum's simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.

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