Why the AA stock is a Great Aluminum Play

My AA Stock Forecast for 2023 is $58.90

The Alcoa corp. price prediction was derived from 2 valuation methods. I’ll explain my approach using these methods and how I determined a stock price for AA of $58.90.

  1. AA P/E and EPS Analysis
  2. AA Comparable Analysis

AA Stock Forecast Via Financial Ratios (PE and EPS)

AA’s current forward EPS estimate for 2023 is $7.17. Furthermore, AA’s forward P/E has been forecasted to be 8.13 also for 2023. By taking the product of AA’s PE and EPS, we can reach an AA stock forecast of $58.29 per share.

AA Comparable Analysis

What Stocks Are Most Similar to AA?

CLF, RPM, AEM, APA, RS, KL, WLK, ICL, WFG, CX

Using a Comparable Analysis to Determine a AA Price Forecast

  1. Price to Book (P/B): AA’s current P/B ratio is 1.6, compared to the average P/B ratio of AA’s peers being 2.05. This implies that AA is undervalued and its share price should change by a factor of 28.27% to be at fair value (based on AA’s P/B compared to the P/B of their peers).
  2. Price to Earnings (P/E): AA stock P/E ratio is currently 9.63, compared to the average P/E ratio of AA’s peers being 10.4. This implies that AA is undervalued and its share price should change by a factor of 7.97% to be at fair value (based on AA’s P/E compared to the P/E of its peers).

By taking the average result of the P/E and P/B comparable analyses, we can predict the AA stock to increase by (an average of) 18.12% to reach their “fair value”. Applying this to the current AA stock price of $50.38 implies a forecasted price of $59.51

What is AA Analyst Sentiment Looking Like?

Analyst Ratings have provided a relatively strong indicator of future price movement, which is why they are used to (hopefully) support our AA stock forecast. There are a total of 40 analyst ratings for AA, which are distributed as follows:

24 Buys

16 Holds

0 Sells

Over 50% (60% to be precise) of analysts have given the AA stock a ‘buy” rating. Based on the current AA analyst ratings there seems to be an overall bullish sentiment, with analyst “buy” ratings forming a majority of total ratings given. This is good news for us as the majority of analysts are in consensus with my price target, which reinforces my belief that the AA stock is undervalued.

AA Stock Forecast and Conclusion

Based on my AA stock forecast of $58.90 per share and the overall bullish analyst sentiment for the AA stock, I would agree with the analysts and say AA is a buy.

Originally published at https://utradea.com.

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