Alcoa in Numbers

This is part three of my coverage on Alcoa. The previous two parts were Alcoa and its CEO and Alcoa's business during the crisis years (2008-2010).

This article will tell the story of Alcoa in numbers. We will look at the business performance, profitability and the balance sheet.

Business performance

Item (in $ million)	2008	2009	2010	2011
Sales	26,901	18,439	21,013	24,951
Gross margin (%)	17.6	8.3	18.3	17.9
OCF	1,234	1,365	2,261	2,193
Cap-Ex	-3,413	-1,622	-1,015	-1,287
FCF	-2,179	-257	1,246	906
Working cap	871	1,608	1,633	1,700
Shares	818	935	1,025	1,161

The improvements are visible across all figures. Alcoa has better OCF, FCF and working capital. It also has a much lower capital expenditure than before. The improvements are quite drastic if one compares to the year 2008 when the new CEO took over the company.

Balance sheet

Item (in $ million)	2008	2009	2010	2011
Cash	762	1,481	1,543	1,939
Inventory	3,238	2,328	2,562	2,899
Current assets	8,150	7,022	6,869	7,713
Goodwill	4,981	5,051	5,119	5,251
Intangibles	610	590	512	-
Total assets	37,822	38,472	39,293	40,120
Current liability	7,279	5,414	5,236	6,013
LT debt	8,509	8,974	8,842	8,640
Pension benefits	-	5,859	5,538	5,844
Other LT liab	7,381	1,889	1,764	2,438
Total liability	26,087	26,052	25,682	26,276
Equity	11,735	12,420	13,611	13,844
Tangible BV	6,144	6,779	7,980	8,593
Debt/Equity	0.73	0.73	0.65	0.63

Profitability

Item	2008	2009	2010	2011
Gross margin	17.6	8.3	18.3	17.9
Op margin	2.9	-8.1	2.6	6
Net margin	-0.28	-6.24	1.21	2.45
Tax rate	43.18	-	27.01	23.99
RoIC	-0.33	-5.18	1.13	2.66
FCF/Income	-	0.22	4.91	1.48
EPS	-0.09	-1.23	0.24	0.55

Shareholder return

Item	2008	2009	2010	2011
Shares	818	935	1,025	1,161
Dividend	0.68	0.26	0.12	0.12
P/S	0.3	0.8	0.8	0.4
P/B	0.8	1.3	1.2	0.7
P/E	40.2	-15.2	61.7	15.7
P/CF	7.5	11	7	4.4

Valuation

It is easy to value the company on a DCF basis but frankly it does not make a lot of sense to me for a cyclical stock. For a cyclical stock I rather trust the P/S analysis.

Using the last 10 years' data we see that t! he market! has paid between $1.5 and $0.3 for each dollar in sales. The current P/S ratio of 0.44 gives you a downside of 30% and an upside of 300% from the current price.

Couple this with the fact that Alcoa is a much better company in terms of almost all measures we saw above and we are getting a very good deal at the moment. The company has a better balance sheet, a much larger TBV, less debt and the FCF has been trending upwards since the new CEO took over. At some point things will hopefully get back to normal and the stock price will recover. I will keep adding until that day comes.

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The company has not seen this share price (around $9) since April 2009, apart from small dips in between. Just before the previous leg of the bull run it was trading at $18 (April 2011) and dropped to a low of $8.45 around October 2011. The shares have not recovered much since then. You have to ask yourself, with all the scary things that you can think of about Alcoa, is the situation worse than it was in the 2009 crisis? If no, the much improved company should not be trading near the same price.

Additional disclosure: I bought 100 shares of Alcoa as a starting position yesterday.