Back to top

Image: Bigstock

Should Value Investors Buy Alcoa (AA) Stock?

Read MoreHide Full Article

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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company to watch right now is Alcoa (AA - Free Report) . AA is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock holds a P/E ratio of 9.31, while its industry has an average P/E of 11.86. Over the past year, AA's Forward P/E has been as high as 1,445.82 and as low as -71.68, with a median of -11.18.

Investors will also notice that AA has a PEG ratio of 0.19. 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 industry currently sports an average PEG of 0.30. Within the past year, AA's PEG has been as high as 0.30 and as low as 0.18, with a median of 0.21.

Another valuation metric that we should highlight is AA's P/B ratio of 1.37. The P/B ratio is used to compare a stock's market value with 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 2.27. Within the past 52 weeks, AA's P/B has been as high as 1.37 and as low as 0.21, with a median of 0.52.

Finally, investors should note that AA has a P/CF ratio of 12.01. 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. AA's P/CF compares to its industry's average P/CF of 17.37. Within the past 12 months, AA's P/CF has been as high as 60.31 and as low as -17.94, with a median of 11.95.

Value investors will likely look at more than just these metrics, but the above data helps show that Alcoa is likely undervalued currently. And when considering the strength of its earnings outlook, AA sticks out at as one of the market's strongest value stocks.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Alcoa Corp. (AA) - free report >>

Published in