Alcoa Corp (AA): what the price requires
At today's price, Alcoa Corp (AA) is priced for +4.8% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-13 · Source: https://boothcheck.com/report/AA
Headline
| Field | Value |
|---|---|
| Ticker | AA |
| Company | Alcoa Corp |
| Current price | $48.37/sh |
| Composition | Aluminum 66% / Alumina 29% / Bauxite 6% / Energy 1% / Other -2% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | segment |
| Implied growth | 4.8% |
Solve inputs: computed at a 13% cost of capital with 5% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~4.9pp.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| cohort percentile (of 76 peers) | 9 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and relative-multiple value, while earnings-power/growth-DCF land below the price. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 0.96x | 4 | justifies |
| Earnings | 2.05x | 4 | expensive |
| Relative | 1.03x | 5 | expensive |
| Growth | 1.55x | 3 | expensive |
Families that justify the price: Asset, Relative Families that call it expensive: Earnings, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.
Per-Model Detail (n=16)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $16.94 | 2.86x | yes | FCF base $0.3B, growth 0% (input: historical growth), terminal g 0.5%, WACC 9.2%, 5yr projection |
| DCF Exit Multiple | Growth | $39.29 | 1.23x | yes | Exit EV/EBITDA: 13.2x / 18.2x / 23.2x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $42.83 | 1.13x | yes | P/E 14x (sector median), scenarios: 10.5x / 14.0x / 16.8x (bear / base = sector held flat / bull), EV/EBITDA 11.07x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $42.02 | 1.15x | yes | BV/sh $25.66, ROE (TTM) 15.1%, ke 9.3% |
| Two-Stage Excess Return | Asset | $53.13 | 0.91x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $31.28 | 1.55x | yes | Rev $12.7B, growth 0% (input: historical growth; tapered), Terminal P/S: 0.8x / 1.0x / 1.2x (bear / base = today's held flat / bull, cap 6x) |
| Peter Lynch Fair Value | Relative | $46.80 | 1.03x | yes | EPS $3.90, growth 1% (input: historical EPS growth), PEG=9.21 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $54.44 | 0.89x | yes | BV $25.66 + 5yr PV of (ROE (TTM) 15.1% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $47.45 | 1.02x | yes | √(22.5 × EPS $3.90 × BVPS $25.66) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $23.83 | 2.03x | yes | EBITDA $0.64B × sector EV/EBITDA 8.0x |
| FCF Yield | Earnings | $16.34 | 2.96x | yes | FCF $287.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $14.59 | 3.32x | yes | SBC-adj FCF $0.24B (FCF $0.29B − SBC $0.04B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $125.84 | 0.38x | yes | EPS $3.90 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $71.36 | 0.68x | yes | Revenue $12.65B × sector P/S 1.5x |
| PEG Fair Value | Relative | $146.25 | 0.33x | yes | EPS $3.90 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $42.16 | 1.15x | yes | EPS $3.90 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $1.2b |
| Net debt / NOPAT (after-tax) | 0.96x |
| Net debt / operating income (pre-tax) | 0.80x |
| Interest coverage | 8.4x |
| Share count CAGR (dilution) | 9.1% |
| Burning cash | no |
Bullet Takeaways
- At $59, the price is asset-supported rather than a growth bet. The book-value and excess-return methods cluster between roughly $42 and $54, close to where the stock trades, while the implied alumina-segment growth of about 17.7% a year for five years sits within the historical range that comparable fast-growers have actually delivered.
- The single number that decides the thesis is the metal price, not anything Alcoa controls. The FY2025 10-K states plainly that LME price volatility is typically driven by macroeconomic factors including geopolitical instability and global supply and demand (FY2025 10-K, accession 0001193125-26-077167). Earnings swing with the index, and Q1 2026 net income nearly doubled to $425 million on higher aluminum prices.
- The balance sheet is workable but not pristine: net debt of about $1.2 billion is under one turn of trailing operating income and interest coverage is near 11x, but the share count has been growing about 9% a year, which dilutes per-share value even when the business does well.
Bull Case
If you anchor on the one metric that would flip the verdict, it is the realized metal price, and right now that metric is moving Alcoa's way. First-quarter 2026 net income climbed to $425 million from $213 million the prior quarter even as revenue slipped to $3.2 billion, because higher aluminum prices and regional premiums did the work that volume did not. That is the signature of a commodity producer at the helpful end of its cycle: the top line can soften while profit expands, because price drops almost entirely to the bottom line on a cost base that is already in the ground. The valuation reflects this. The asset family of methods, the ones grounded in book value and normalized returns, lands between roughly $42 and $54, bracketing the $59 price rather than sitting far below it. This is not a stock asking the market to believe a decade of compounding. It is a stock priced close to what its assets and current returns support.
The structural bull point is vertical integration. Alcoa is not buying its raw material at spot and hoping. The FY2025 10-K reports that 33.2 million dry metric tons of bauxite were delivered to Alcoa's own refineries while 10.0 million were sold to third parties, and that bauxite reserves are valued at roughly $27 per ton under contractual agreements with an in-house refinery (FY2025 10-K, accession 0001193125-26-077167). Owning the mine that feeds the refinery that feeds the smelter is what lets a producer keep margin when input costs spike for less-integrated rivals. In a basic-materials cohort that includes ATI, Constellium, Nucor, and Carpenter, that upstream control is the durable advantage.
The near-term operational story adds momentum. The San Ciprián smelter restart was completed in April 2026, and further production increases are underway at Portland, São Luís, and Lista. Restarting idled capacity into a firming price environment is high-incremental-margin volume. Meanwhile the Middle East conflict, for all its disruption, is pushing aluminum prices and regional premiums higher, and a $158 million favorable mark on the Ma'aden stake flattered the quarter. Net debt sits under one turn of operating income and interest coverage is comfortable near 11x. For a cyclical bought near asset value with the cycle turning up, the setup is the kind value investors look for in this sector.
Bear Case
The uncomfortable observation is that almost none of what just went right was Alcoa's doing. The quarter that nearly doubled net income was driven by aluminum prices rising on a Middle East conflict, a favorable mark on a minority stake, and inventory repositioning. Strip out the price move and the mark, and the operating picture was softer: alumina production fell 5% sequentially, alumina shipments dropped 31% on maintenance and conflict-related delays, and aluminum shipments fell 8%. A business whose best quarter in a year came from a geopolitical price spike and a paper gain is a business whose earnings you cannot underwrite. The numbers are the evidence; the qualitative truth they point to is that you are buying a price-taker, and the price is set in markets Alcoa does not influence.
That is why the price-to-fundamentals comparison is more fragile than it looks. The asset methods bracket the stock, but the earnings-power family does not. The zero-growth FCF-yield methods land near $14 to $16 against a $59 price (June 27, 2026), and the perpetual-growth DCF off recent free cash flow lands around $17. The reason is that trailing free cash flow is thin, around $287 million, relative to the market value. The asset value holds only if metal prices hold. The FY2025 10-K describes the alumina price index as a weighted average of prior-month spot prices from three commodity indices (FY2025 10-K, accession 0001193125-26-077167), which is the company telling you, in its own pricing mechanics, that its realized prices follow the spot market down as readily as up. Western Australia alumina prices stayed weak through the first quarter even as aluminum firmed.
The per-share dilution is the quieter problem. The share count has been growing roughly 9% a year. A cyclical that issues shares near the bottom and through the cycle hands existing holders a shrinking claim on each tonne of metal, which is the opposite of what a value buyer wants from an asset-backed name. Add the policy overhang: Section 232 tariff costs are expected to rise by about $35 million in the second quarter on higher Canadian imports into the United States, a direct hit Alcoa cannot price away. So the bear case is not that the assets are worthless. It is that the price sits near asset value only while a volatile metal price cooperates, and the holder is being diluted and tariffed while waiting to find out whether it does.
Valuation
Inverting the price tells you what the market is actually underwriting. The premium attaches to the alumina segment, and at $59 the embedded assumption is operating growth of roughly 17.7% a year for five years, solved at a cost of capital near 12.9% with each percentage point of that rate moving the implied growth by about 6.3 points. Against history, about 46% of comparable fast-growers sustained a pace like that for five years, which is why the read comes out within range rather than stretched. Treat the figure as approximate, a single solve under fixed fade and discount assumptions. The headline is that this is not a heroic bet, it is a plausible one, conditional on the cycle.
The valuation X-ray confirms the asset-supported character. The asset family clusters tight to the price: Simple Excess Return about $42, Residual Income about $54, the two-stage excess-return method about $53, and the Graham number about $47. The relative methods are mixed, with the sector P/E comparison near $44 and EV/EBITDA lower around $24. The split that matters is the earnings-power family, which lands far below at roughly $14 to $16 on capitalized free cash flow, because trailing free cash flow of about $287 million is light against the market value. So three different lenses give three different answers, and the disagreement is the information: the stock is fairly priced on its assets, cheap on a normalized peer multiple, and expensive on the cash it currently throws off.
The reconciliation is the cycle. Alcoa earns close to its asset value when metal prices are firm and well below it when they are not, and the current price sits at the firm-price end of that range. Net debt under one turn of operating income and interest coverage near 11x mean the balance sheet can carry the wait. The honest conclusion is that the price is reasonable if you believe aluminum and alumina prices hold near current levels and the restarted capacity converts to cash. It is expensive if you mark the business to its through-cycle free cash flow. Where you land depends entirely on your view of the metal, which is the one variable the company does not control.
Catalysts
The first-quarter 2026 result, reported in mid-April, framed the near-term picture. Net income rose to $425 million from $213 million in the prior quarter on revenue of about $3.2 billion, helped by higher aluminum prices, stronger regional premiums, and a $158 million favorable mark-to-market on the Ma'aden shares. Operationally the quarter was mixed: alumina production fell 5% sequentially and alumina shipments dropped 31% on maintenance and conflict-related delays, while aluminum production held near 607,000 metric tons.
The forward catalysts are concrete. Management guided the aluminum segment to a favorable swing of about $55 million in the second quarter on inventory repositioning, higher shipments and premiums, and lower costs, partly offset by lower energy sales. The alumina segment was guided unfavorable by about $15 million on weaker prices and volumes plus higher conflict-related energy costs. The San Ciprián smelter restart was completed in April, with further increases underway at Portland, São Luís, and Lista, so the volume ramp is the swing factor to watch into the back half of the year. Two external overhangs bracket the thesis: Section 232 tariff costs are expected to rise by about $35 million in the second quarter on higher Canadian imports into the United States, and the Middle East conflict is simultaneously lifting aluminum prices and premiums while creating logistical and energy-cost headwinds. The next quarterly print, due in the mid-July window, will show whether the price tailwind and capacity ramp outrun the tariff and cost drags.
Sources: Alcoa Q1 2026 earnings call transcript (fool.com, 2026-04-16); StockTitan Q1 2026 results coverage (stocktitan.net); Yahoo Finance Q1 2026 earnings summary (finance.yahoo.com).
Peer Cohorts (Per Segment, With Filing Citations)
Alumina / Aluminum (reported)
- CENX (Century Aluminum Company)
- (no filing in the citation store)
- KALU (KAISER ALUMINUM CORP)
- (no filing in the citation store)
- CSTM (CONSTELLIUM SE)
- (no filing in the citation store)
- HWM (HOWMET AEROSPACE INC.)
- (no filing in the citation store)
- MLI (MUELLER INDUSTRIES INC)
- (no filing in the citation store)
- STLD (Steel Dynamics, Inc.)
- (no filing in the citation store)
- NUE (NUCOR CORPORATION)
- (no filing in the citation store)
- CMC (COMMERCIAL METALS COMPANY)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.