Now Is Not The Time To Buy Alcoa Stock

Alcoa (NYSE:AA) stock looks unattractive – making it a bad pick to buy at its current price of around $29. We believe there are several major concerns with AA stock, which makes it unattractive despite its current valuation being very low.

We arrive at our conclusion by comparing the current valuation of AA stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Alcoa along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very weak operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

How Does Alcoa’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, AA stock looks cheap compared to the broader market.

• Alcoa has a price-to-sales (P/S) ratio of 0.5 vs. a figure of 2.8 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 10.4 compared to 17.6 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 8.1 vs. the benchmark’s 24.5

How Have Alcoa’s Revenues Grown Over Recent Years?

Alcoa’s Revenues have seen notable growth over recent years.

• Alcoa has seen its top line shrink at an average rate of 0.0% over the last 3 years (vs. increase of 6.2% for S&P 500)
• Its revenues have grown 12.7% from $11 Bil to $12 Bil in the last 12 months (vs. growth of 5.3% for S&P 500)
• Also, its quarterly revenues grew 34.3% to $3.5 Bil in the most recent quarter from $2.6 Bil a year ago (vs. 4.9% improvement for S&P 500)

How Profitable Is Alcoa?

Alcoa’s profit margins are considerably worse than most companies in the Trefis coverage universe.

• Alcoa’s Operating Income over the last four quarters was $828 Mil, which represents a poor Operating Margin of 7.0% (vs. 13.1% for S&P 500)
• Alcoa’s Operating Cash Flow (OCF) over this period was $622 Mil, pointing to a very poor OCF Margin of 5.2% (vs. 15.7% for S&P 500)
• For the last four-quarter period, Alcoa’s Net Income was $60 Mil – indicating a very poor Net Income Margin of 0.5% (vs. 11.3% for S&P 500)

Does Alcoa Look Financially Stable?

Alcoa’s balance sheet looks weak.

• Alcoa’s Debt figure was $2.8 Bil at the end of the most recent quarter, while its market capitalization is $7.5 Bil (as of 5/19/2025). This implies a poor Debt-to-Equity Ratio of 43.4% (vs. 21.5% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $1.1 Bil of the $14 Bil in Total Assets for Alcoa.  This yields a moderate Cash-to-Assets Ratio of 8.1% (vs. 15.0% for S&P 500)

How Resilient Is AA Stock During A Downturn?

AA stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

• AA stock fell 75.4% from a high of $95.06 on 24 March 2022 to $23.41 on 23 October 2023, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $47.42 on 26 November 2024 and currently trades at around $29

Covid Pandemic (2020)

• AA stock fell 74.5% from a high of $21.51 on 1 January 2020 to $5.48 on 20 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 1 December 2020

Putting All The Pieces Together: What It Means For AA Stock

In summary, Alcoa’s performance across the parameters detailed above are as follows:

• Growth: Very Strong
• Profitability: Extremely Weak
• Financial Stability: Weak
• Downturn Resilience: Extremely Weak
• Overall: Very Weak

Hence, despite its very low valuation, we think that the stock is unattractive, which supports our conclusion that AA is a bad stock to buy.

While you would do well to avoid AA stock for now, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates