We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Alcoa (AA) Soars to 52-Week High, Time to Cash Out?
Read MoreHide Full Article
Have you been paying attention to shares of Alcoa (AA - Free Report) ? Shares have been on the move with the stock up 25.1% over the past month. The stock hit a new 52-week high of $95.79 in the previous session. Alcoa has gained 58.1% since the start of the year compared to the -6.5% move for the Zacks Industrial Products sector and the 27.2% return for the Zacks Metal Products - Distribution industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on January 19, 2022, Alcoa reported EPS of $2.5 versus consensus estimate of $2.04 while it beat the consensus revenue estimate by 1.41%.
For the current fiscal year, Alcoa is expected to post earnings of $11.77 per share on $14.2 billion in revenues. This represents a 72.33% change in EPS on a 16.86% change in revenues. For the next fiscal year, the company is expected to earn $9.15 per share on $13.56 billion in revenues. This represents a year-over-year change of -22.19% and -4.54%, respectively.
Valuation Metrics
Alcoa may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Alcoa has a Value Score of C. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 8X current fiscal year EPS estimates, which is not in-line with the peer industry average of 10.4X. On a trailing cash flow basis, the stock currently trades at 9X versus its peer group's average of 7.7X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Alcoa currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Alcoa passes the test. Thus, it seems as though Alcoa shares could still be poised for more gains ahead.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Alcoa (AA) Soars to 52-Week High, Time to Cash Out?
Have you been paying attention to shares of Alcoa (AA - Free Report) ? Shares have been on the move with the stock up 25.1% over the past month. The stock hit a new 52-week high of $95.79 in the previous session. Alcoa has gained 58.1% since the start of the year compared to the -6.5% move for the Zacks Industrial Products sector and the 27.2% return for the Zacks Metal Products - Distribution industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on January 19, 2022, Alcoa reported EPS of $2.5 versus consensus estimate of $2.04 while it beat the consensus revenue estimate by 1.41%.
For the current fiscal year, Alcoa is expected to post earnings of $11.77 per share on $14.2 billion in revenues. This represents a 72.33% change in EPS on a 16.86% change in revenues. For the next fiscal year, the company is expected to earn $9.15 per share on $13.56 billion in revenues. This represents a year-over-year change of -22.19% and -4.54%, respectively.
Valuation Metrics
Alcoa may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Alcoa has a Value Score of C. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 8X current fiscal year EPS estimates, which is not in-line with the peer industry average of 10.4X. On a trailing cash flow basis, the stock currently trades at 9X versus its peer group's average of 7.7X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Alcoa currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Alcoa passes the test. Thus, it seems as though Alcoa shares could still be poised for more gains ahead.