Alcoa Corp (NYSE:AA) – A Potential Fit for Growth Investors
By Mill Chart
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Alcoa Corp (NYSE:AA) is a global leader in bauxite mining, alumina refining, and aluminum production. The company operates across multiple continents, serving industries that rely on aluminum for manufacturing and construction. For investors following the principles outlined in The Little Book That Makes You Rich by Louis Navellier, AA presents an interesting case due to its recent financial performance.
Why Alcoa Corp Fits the Little Book Criteria
Navellier’s growth investing strategy focuses on companies with strong earnings momentum, improving margins, and accelerating revenue. Here’s how AA aligns with these principles:
- Positive Earnings Revisions – Analysts have raised EPS estimates for the next quarter by 4.08% over the past three months, signaling confidence in future performance.
- Consistent Earnings Surprises – AA has beaten EPS estimates in all of the last four quarters, with an average surprise of 48.15%.
- Strong Sales Growth – Revenue grew 20.85% year-over-year, while quarterly sales increased 29.63%, indicating robust demand.
- Expanding Operating Margins – Operating margin surged 645.12% over the past year, reflecting improved profitability.
- Healthy Cash Flow – Free cash flow grew 155.88%, providing financial flexibility.
- Earnings Growth Acceleration – Quarterly EPS surged 365.43%, a sharp improvement from the previous year’s decline.
- High Return on Equity – AA’s ROE stands at 14.79%, well above the minimum 10% threshold.
Fundamental Analysis Summary
Our fundamental analysis report assigns AA a rating of 4 out of 10, noting strengths in profitability and valuation but some concerns in financial health. Key takeaways:
- Profitability: Strong ROE (14.79%) and ROIC (11.05%) outperform most industry peers.
- Valuation: AA trades at a P/E of 6.26, significantly below the industry average (28.16).
- Growth: EPS surged 237.06% over the past year, though revenue growth expectations are modest.
- Dividend: A 1.51% yield, with a sustainable payout ratio of 11.28%.
Final Thoughts
While AA shows strong momentum in earnings and margins, investors should weigh its cyclical exposure and debt levels. For those seeking high-growth candidates, AA’s recent performance aligns with Navellier’s criteria.
