The shares of Alcoa Corporation (NYSE:AA) and Steel Dynamics, Inc. (NASDAQ:STLD) were among the active stocks of the last trading sessions. Alcoa Corporation (NYSE:AA) declined to -1.08% closing at the price of $35.67 whereas the shares of Steel Dynamics, Inc. (NASDAQ:STLD) declined -2.38% with the decrease of -1.03 points closing at the price of $42.33. Alcoa Corporation has currently decrease -35.1% in its stock over the period of 6-months while its rival Steel Dynamics, Inc. subtracted -5.05% in the previous 6-months.
Now we have to analyze the facts that if the stocks were worthy off investors’ money? The facts to analyze here are risks, profitability, returns and price trends.
Returns and Profitability
Profitability and returns are the main reason of investment, the investors are looking for profits that they get and return they should expect over the period of time.
The first and foremost return that is considered while making an investment is the ROI or Return on Investment. The ROI is the ratio between the profit against the cost of investment. Currently the ROI of Alcoa Corporation (NYSE:AA) is 10.6% while the ROI of Steel Dynamics, Inc. (NASDAQ:STLD) is 13.2%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, AA’s EBITDA Margin is 3.99 whereas STLD’s is 7.62.
Both the profitability ratios suggest that Steel Dynamics, Inc. (NASDAQ:STLD) is more suitable investment in terms of profitability and return.
EPS & Surprise Factor
Alcoa Corporation (NYSE:AA) reported $1.52/share EPS for the previous quarter where analysts were predicting an EPS to be $1.32/share Thus beating the analyst Estimates with a Surprise Factor of 15.2 Percent. While, Steel Dynamics, Inc. (NASDAQ:STLD) reported EPS of $1.53/share in the last quarter. The analysts projected EPS of $1.49/share depicting a Surprise of 2.7 Percent.
Taking a look at Earnings per Share, Alcoa Corporation tends to be beating the analyst estimates more than Steel Dynamics, Inc.. so AA is more profitable than STLD.
Technical Analysis of Alcoa Corporation & Steel Dynamics, Inc.
Moving average convergence divergence (MACD) shows that Alcoa Corporation (NYSE:AA) is on a PRICE RELATIVITY trend While Steel Dynamics, Inc. (NASDAQ:STLD) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Alcoa Corporation was in BEARISH territory and Steel Dynamics, Inc. was in BEARISH territory.
AA’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While STLD’s candle is BEARISH with HIGH.
EPS Growth Rate: AA’s 3.5% versus STLD’s 11.82%
Another shareholder value can be analyzed through the EPS growth rate; the next 5 years EPS growth rate is predicted by the analysts after the analyzing the previous trends. The next 5 year EPS growth rate of Alcoa Corporation (NYSE:AA) is predicted at 3.5% while Steel Dynamics, Inc. (NASDAQ:STLD) stands at 11.82%. These numbers suggest that STLD is more suitable investment in terms of EPS growth rate.
Financial Risk and Liquidity Concerns
The current ratio and the debt ratio are the two ratios that show the investor how quickly the company is able to payout its debt and how quickly it can cover its obligations. The current ratio of AA stands at 1.4 while STLD is at 3.6 whereas the debt ratio of the prior is 0.38 while the debt ratio of the later is 0.63.
The values of the both ratios suggest that STLD is more suitable investment when the liquidity and risk is the main concern.
While making an investment, another main factor to consider before investing is the analyst recommendation on the scale of 1 to 5 where 1 is strong buy, 2 is buy, 3 is hold, 4 is Sell and 5 is strong sell. Analyst recommend 2.1 for AA and 2 for STLD which means AA has Hold rating whereas STLD has Buy rating.
Another recommendation of analyst that is to be considered worthy is the price target. The mare price or price trend does not suggest the suitability of a stock. The price target set by analyst is also to be considered while investing as it suggests to what extent the stock will rise or fall in the near future. The price target set for AA is $58.31 which is 38.83% of its current price while STLD has price target of 53.77 which is 21.28% of its current price.
Valuation is the process of determining the company’s worth for an investor, the valuation ratios give an insight to that worthiness.
AA currently has price to earning P/E ratio of 41.82 whereas STLD has 11.59 while the forward P/E ratio for the prior stands at 8.9 and for the later it depicts the value of 8.58.
The price to Book P/B for AA is 1.32, Price to Sale is at 0.53 and for STLD these ratios stand at 2.66 and 0.96.