Intrinsic value of Alcoa - AA

Previous Close

$29.24

  Intrinsic Value

$840.95

stock screener

  Rating & Target

str. buy

+999%

Previous close

$29.24

 
Intrinsic value

$840.95

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of AA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 5.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  25.20
  23.18
  21.36
  19.73
  18.25
  16.93
  15.74
  14.66
  13.70
  12.83
  12.04
  11.34
  10.71
  10.13
  9.62
  9.16
  8.74
  8.37
  8.03
  7.73
  7.46
  7.21
  6.99
  6.79
  6.61
  6.45
  6.31
  6.17
  6.06
  5.95
Revenue, $m
  14,588
  17,970
  21,809
  26,111
  30,877
  36,103
  41,784
  47,910
  54,472
  61,458
  68,860
  76,668
  84,875
  93,477
  102,471
  111,856
  121,636
  131,815
  142,402
  153,408
  164,846
  176,732
  189,084
  201,924
  215,274
  229,159
  243,608
  258,650
  274,316
  290,642
Variable operating expenses, $m
  7,207
  8,877
  10,773
  12,899
  15,253
  17,835
  20,641
  23,668
  26,909
  30,360
  34,017
  37,874
  41,928
  46,178
  50,621
  55,257
  60,088
  65,117
  70,347
  75,784
  81,434
  87,306
  93,408
  99,750
  106,345
  113,205
  120,342
  127,773
  135,512
  143,577
Fixed operating expenses, $m
  4,844
  4,951
  5,060
  5,171
  5,285
  5,401
  5,520
  5,641
  5,765
  5,892
  6,022
  6,154
  6,290
  6,428
  6,570
  6,714
  6,862
  7,013
  7,167
  7,325
  7,486
  7,651
  7,819
  7,991
  8,167
  8,346
  8,530
  8,718
  8,910
  9,106
Total operating expenses, $m
  12,051
  13,828
  15,833
  18,070
  20,538
  23,236
  26,161
  29,309
  32,674
  36,252
  40,039
  44,028
  48,218
  52,606
  57,191
  61,971
  66,950
  72,130
  77,514
  83,109
  88,920
  94,957
  101,227
  107,741
  114,512
  121,551
  128,872
  136,491
  144,422
  152,683
Operating income, $m
  2,537
  4,142
  5,975
  8,041
  10,339
  12,867
  15,623
  18,601
  21,797
  25,206
  28,821
  32,640
  36,657
  40,871
  45,281
  49,885
  54,686
  59,686
  64,889
  70,300
  75,926
  81,776
  87,858
  94,182
  100,762
  107,608
  114,735
  122,159
  129,895
  137,959
EBITDA, $m
  3,477
  5,299
  7,380
  9,722
  12,327
  15,192
  18,313
  21,686
  25,305
  29,163
  33,255
  37,576
  42,122
  46,890
  51,879
  57,087
  62,518
  68,173
  74,058
  80,178
  86,541
  93,156
  100,033
  107,184
  114,623
  122,364
  130,421
  138,814
  147,558
  156,674
Interest expense (income), $m
  226
  102
  340
  614
  925
  1,273
  1,659
  2,083
  2,543
  3,039
  3,570
  4,136
  4,735
  5,367
  6,032
  6,729
  7,457
  8,217
  9,009
  9,833
  10,690
  11,582
  12,508
  13,470
  14,471
  15,510
  16,591
  17,716
  18,886
  20,104
  21,373
Earnings before tax, $m
  2,435
  3,802
  5,361
  7,116
  9,065
  11,208
  13,540
  16,059
  18,759
  21,636
  24,685
  27,904
  31,290
  34,839
  38,552
  42,428
  46,469
  50,677
  55,055
  59,609
  64,345
  69,268
  74,387
  79,712
  85,251
  91,017
  97,020
  103,273
  109,791
  116,587
Tax expense, $m
  657
  1,026
  1,448
  1,921
  2,448
  3,026
  3,656
  4,336
  5,065
  5,842
  6,665
  7,534
  8,448
  9,407
  10,409
  11,456
  12,547
  13,683
  14,865
  16,095
  17,373
  18,702
  20,085
  21,522
  23,018
  24,574
  26,195
  27,884
  29,644
  31,478
Net income, $m
  1,777
  2,775
  3,914
  5,195
  6,618
  8,182
  9,884
  11,723
  13,694
  15,794
  18,020
  20,370
  22,841
  25,433
  28,143
  30,973
  33,922
  36,994
  40,190
  43,515
  46,972
  50,566
  54,303
  58,190
  62,233
  66,442
  70,824
  75,389
  80,147
  85,108

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  21,839
  26,901
  32,648
  39,088
  46,222
  54,047
  62,551
  71,722
  81,545
  92,004
  103,084
  114,773
  127,059
  139,936
  153,399
  167,449
  182,089
  197,328
  213,177
  229,653
  246,776
  264,569
  283,060
  302,281
  322,266
  343,052
  364,682
  387,200
  410,653
  435,093
Adjusted assets (=assets-cash), $m
  21,839
  26,901
  32,648
  39,088
  46,222
  54,047
  62,551
  71,722
  81,545
  92,004
  103,084
  114,773
  127,059
  139,936
  153,399
  167,449
  182,089
  197,328
  213,177
  229,653
  246,776
  264,569
  283,060
  302,281
  322,266
  343,052
  364,682
  387,200
  410,653
  435,093
Revenue / Adjusted assets
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
Average production assets, $m
  11,554
  14,232
  17,272
  20,680
  24,454
  28,594
  33,093
  37,945
  43,142
  48,675
  54,537
  60,721
  67,221
  74,034
  81,157
  88,590
  96,336
  104,398
  112,783
  121,499
  130,558
  139,972
  149,755
  159,924
  170,497
  181,494
  192,937
  204,851
  217,259
  230,189
Working capital, $m
  -452
  -557
  -676
  -809
  -957
  -1,119
  -1,295
  -1,485
  -1,689
  -1,905
  -2,135
  -2,377
  -2,631
  -2,898
  -3,177
  -3,468
  -3,771
  -4,086
  -4,414
  -4,756
  -5,110
  -5,479
  -5,862
  -6,260
  -6,673
  -7,104
  -7,552
  -8,018
  -8,504
  -9,010
Total debt, $m
  4,663
  8,414
  12,672
  17,444
  22,731
  28,529
  34,830
  41,626
  48,905
  56,655
  64,865
  73,526
  82,631
  92,173
  102,149
  112,560
  123,408
  134,700
  146,444
  158,653
  171,341
  184,526
  198,228
  212,470
  227,279
  242,682
  258,710
  275,395
  292,774
  310,884
Total liabilities, $m
  16,183
  19,934
  24,192
  28,964
  34,251
  40,049
  46,350
  53,146
  60,425
  68,175
  76,385
  85,046
  94,151
  103,693
  113,669
  124,080
  134,928
  146,220
  157,964
  170,173
  182,861
  196,046
  209,748
  223,990
  238,799
  254,202
  270,230
  286,915
  304,294
  322,404
Total equity, $m
  5,656
  6,967
  8,456
  10,124
  11,972
  13,998
  16,201
  18,576
  21,120
  23,829
  26,699
  29,726
  32,908
  36,243
  39,730
  43,369
  47,161
  51,108
  55,213
  59,480
  63,915
  68,523
  73,313
  78,291
  83,467
  88,851
  94,453
  100,285
  106,359
  112,689
Total liabilities and equity, $m
  21,839
  26,901
  32,648
  39,088
  46,223
  54,047
  62,551
  71,722
  81,545
  92,004
  103,084
  114,772
  127,059
  139,936
  153,399
  167,449
  182,089
  197,328
  213,177
  229,653
  246,776
  264,569
  283,061
  302,281
  322,266
  343,053
  364,683
  387,200
  410,653
  435,093
Debt-to-equity ratio
  0.820
  1.210
  1.500
  1.720
  1.900
  2.040
  2.150
  2.240
  2.320
  2.380
  2.430
  2.470
  2.510
  2.540
  2.570
  2.600
  2.620
  2.640
  2.650
  2.670
  2.680
  2.690
  2.700
  2.710
  2.720
  2.730
  2.740
  2.750
  2.750
  2.760
Adjusted equity ratio
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,777
  2,775
  3,914
  5,195
  6,618
  8,182
  9,884
  11,723
  13,694
  15,794
  18,020
  20,370
  22,841
  25,433
  28,143
  30,973
  33,922
  36,994
  40,190
  43,515
  46,972
  50,566
  54,303
  58,190
  62,233
  66,442
  70,824
  75,389
  80,147
  85,108
Depreciation, amort., depletion, $m
  939
  1,157
  1,404
  1,681
  1,988
  2,325
  2,690
  3,085
  3,507
  3,957
  4,434
  4,937
  5,465
  6,019
  6,598
  7,202
  7,832
  8,488
  9,169
  9,878
  10,614
  11,380
  12,175
  13,002
  13,862
  14,756
  15,686
  16,655
  17,663
  18,715
Funds from operations, $m
  2,717
  3,932
  5,318
  6,876
  8,606
  10,506
  12,575
  14,808
  17,201
  19,751
  22,454
  25,307
  28,307
  31,452
  34,741
  38,175
  41,754
  45,482
  49,360
  53,393
  57,586
  61,945
  66,478
  71,192
  76,095
  81,198
  86,510
  92,044
  97,811
  103,823
Change in working capital, $m
  -91
  -105
  -119
  -133
  -148
  -162
  -176
  -190
  -203
  -217
  -229
  -242
  -254
  -267
  -279
  -291
  -303
  -316
  -328
  -341
  -355
  -368
  -383
  -398
  -414
  -430
  -448
  -466
  -486
  -506
Cash from operations, $m
  2,808
  4,037
  5,437
  7,009
  8,754
  10,668
  12,751
  14,998
  17,405
  19,968
  22,684
  25,549
  28,561
  31,718
  35,020
  38,466
  42,058
  45,797
  49,688
  53,734
  57,941
  62,314
  66,861
  71,590
  76,509
  81,628
  86,958
  92,510
  98,296
  104,329
Maintenance CAPEX, $m
  -751
  -939
  -1,157
  -1,404
  -1,681
  -1,988
  -2,325
  -2,690
  -3,085
  -3,507
  -3,957
  -4,434
  -4,937
  -5,465
  -6,019
  -6,598
  -7,202
  -7,832
  -8,488
  -9,169
  -9,878
  -10,614
  -11,380
  -12,175
  -13,002
  -13,862
  -14,756
  -15,686
  -16,655
  -17,663
New CAPEX, $m
  -2,322
  -2,678
  -3,040
  -3,407
  -3,775
  -4,140
  -4,499
  -4,852
  -5,197
  -5,533
  -5,862
  -6,184
  -6,500
  -6,813
  -7,123
  -7,433
  -7,746
  -8,062
  -8,385
  -8,717
  -9,059
  -9,414
  -9,783
  -10,169
  -10,573
  -10,997
  -11,443
  -11,913
  -12,408
  -12,930
Cash from investing activities, $m
  -3,073
  -3,617
  -4,197
  -4,811
  -5,456
  -6,128
  -6,824
  -7,542
  -8,282
  -9,040
  -9,819
  -10,618
  -11,437
  -12,278
  -13,142
  -14,031
  -14,948
  -15,894
  -16,873
  -17,886
  -18,937
  -20,028
  -21,163
  -22,344
  -23,575
  -24,859
  -26,199
  -27,599
  -29,063
  -30,593
Free cash flow, $m
  -265
  419
  1,240
  2,198
  3,298
  4,541
  5,927
  7,455
  9,123
  10,927
  12,864
  14,931
  17,124
  19,441
  21,878
  24,435
  27,110
  29,903
  32,815
  35,848
  39,004
  42,286
  45,698
  49,246
  52,934
  56,769
  60,759
  64,911
  69,234
  73,736
Issuance/(repayment) of debt, $m
  3,259
  3,751
  4,258
  4,772
  5,287
  5,798
  6,302
  6,796
  7,279
  7,750
  8,210
  8,661
  9,104
  9,542
  9,976
  10,411
  10,848
  11,292
  11,744
  12,209
  12,688
  13,185
  13,702
  14,243
  14,809
  15,403
  16,028
  16,686
  17,379
  18,110
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  3,259
  3,751
  4,258
  4,772
  5,287
  5,798
  6,302
  6,796
  7,279
  7,750
  8,210
  8,661
  9,104
  9,542
  9,976
  10,411
  10,848
  11,292
  11,744
  12,209
  12,688
  13,185
  13,702
  14,243
  14,809
  15,403
  16,028
  16,686
  17,379
  18,110
Total cash flow (excl. dividends), $m
  2,993
  4,171
  5,498
  6,970
  8,584
  10,339
  12,229
  14,251
  16,402
  18,677
  21,075
  23,592
  26,228
  28,982
  31,854
  34,846
  37,958
  41,195
  44,560
  48,057
  51,692
  55,471
  59,400
  63,488
  67,743
  72,172
  76,787
  81,597
  86,613
  91,846
Retained Cash Flow (-), $m
  -1,133
  -1,311
  -1,488
  -1,668
  -1,848
  -2,027
  -2,203
  -2,375
  -2,544
  -2,709
  -2,870
  -3,027
  -3,182
  -3,335
  -3,487
  -3,639
  -3,792
  -3,947
  -4,105
  -4,267
  -4,435
  -4,608
  -4,789
  -4,978
  -5,176
  -5,384
  -5,602
  -5,832
  -6,074
  -6,330
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  1,860
  2,859
  4,009
  5,302
  6,737
  8,312
  10,026
  11,876
  13,857
  15,968
  18,205
  20,565
  23,046
  25,647
  28,367
  31,207
  34,166
  37,248
  40,455
  43,789
  47,257
  50,862
  54,611
  58,510
  62,566
  66,789
  71,185
  75,765
  80,538
  85,516
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  1,783
  2,618
  3,489
  4,366
  5,222
  6,032
  6,773
  7,423
  7,960
  8,372
  8,645
  8,776
  8,763
  8,610
  8,328
  7,930
  7,434
  6,860
  6,229
  5,564
  4,888
  4,220
  3,579
  2,980
  2,434
  1,949
  1,528
  1,172
  879
  644
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Alcoa Corporation, formerly Alcoa Upstream Corporation, is engaged in the production of bauxite, alumina and aluminum of various cast and rolled products. The Company is engaged in the production and management of aluminum and alumina combined through its participation in various aspects of the industry, such as technology, mining, refining, smelting, and recycling. The Company's segments include Bauxite, Alumina, Aluminum, Cast Products, Energy and Rolled Products. The Company's Bauxite segment represents its global portfolio of bauxite mining assets. The Company's Alumina segment represents its refining system across the world, and processes bauxite into alumina and sells it directly to internal and external smelter customers across the world. The Company's Aluminum segment represents its smelter system across the world. Its Energy segment represents its portfolio of energy assets, with power production capacity of approximately 1,685 megawatts.

FINANCIAL RATIOS  of  Alcoa (AA)

Valuation Ratios
P/E Ratio -13.4
Price to Sales 0.6
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow -17.2
Price to Free Cash Flow -7.5
Growth Rates
Sales Growth Rate -16.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.3%
Cap. Spend. - 3 Yr. Gr. Rate -6.6%
Financial Strength
Quick Ratio 41
Current Ratio 0
LT Debt to Equity 25.2%
Total Debt to Equity 25.6%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.5%
Ret/ On Assets - 3 Yr. Avg. 4.8%
Return On Total Capital -4.8%
Ret/ On T. Cap. - 3 Yr. Avg. -5.9%
Return On Equity -5.3%
Return On Equity - 3 Yr. Avg. -6.2%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 15.2%
Gross Margin - 3 Yr. Avg. 18.1%
EBITDA Margin 8.4%
EBITDA Margin - 3 Yr. Avg. 8%
Operating Margin -0.1%
Oper. Margin - 3 Yr. Avg. 0.7%
Pre-Tax Margin -1.7%
Pre-Tax Margin - 3 Yr. Avg. -1.7%
Net Profit Margin -4.3%
Net Profit Margin - 3 Yr. Avg. -4.6%
Effective Tax Rate -113.6%
Eff/ Tax Rate - 3 Yr. Avg. -227.9%
Payout Ratio 0%

AA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AA stock intrinsic value calculation we used $11652 million for the last fiscal year's total revenue generated by Alcoa. The default revenue input number comes from 0001 income statement of Alcoa. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AA stock valuation model: a) initial revenue growth rate of 25.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for AA is calculated based on our internal credit rating of Alcoa, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Alcoa.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AA stock the variable cost ratio is equal to 49.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4740 million in the base year in the intrinsic value calculation for AA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 7.3% for Alcoa.

Corporate tax rate of 27% is the nominal tax rate for Alcoa. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AA are equal to 79.2%.

Life of production assets of 12.3 years is the average useful life of capital assets used in Alcoa operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AA is equal to -3.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4523 million for Alcoa - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 186.473 million for Alcoa is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Alcoa at the current share price and the inputted number of shares is $5.5 billion.

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COMPANY NEWS

▶ Near a 2-Year Low, Is Alcoa a Buy?   [Dec-08-18 09:03AM  Motley Fool]
▶ Why Alcoa Stock Just Jumped 9%   [Nov-28-18 03:24PM  Motley Fool]
▶ Alcoa amends and restates revolving credit agreement   [Nov-27-18 07:54AM  American City Business Journals]
▶ How Alcoa Fell 13.4% in October on Fears Over China   [Nov-05-18 07:00AM  Motley Fool]
▶ Company News For Oct 19, 2018   [09:48AM  Zacks]
▶ Textron and Activision skid while Alcoa and Acadia climb   [Oct-18-18 04:41PM  Associated Press]
▶ Alcoa Corp. to Host Earnings Call   [03:00PM  ACCESSWIRE]
▶ Why I Like Alcoa Corporation (NYSE:AA)   [08:36AM  Simply Wall St.]
▶ Alcoa Q3 Earnings Preview   [07:15AM  Benzinga]
▶ Commodity Producers Feel the Heat in Trade War   [Oct-16-18 07:00PM  Bloomberg]
▶ What Is Behind the Rise in Aluminum Prices?   [06:15AM  TheStreet.com]
▶ Winners and losers   [Oct-03-18 05:01PM  Yahoo Finance Video]
▶ [$$] Aluminum Makers Profits Suffer as Prices Rise for Key Ingredient   [Sep-27-18 07:43PM  The Wall Street Journal]
▶ [$$] Aluminum Makers' Profits Suffer as Alumina Prices Soar   [06:04AM  The Wall Street Journal]
▶ Four big names in Final Trades   [01:28PM  CNBC Videos]
▶ Bull of the Day: Alcoa   [06:45AM  Zacks]
▶ Alcoa Corporation Named to Dow Jones Sustainability Indices   [Sep-19-18 10:49AM  Business Wire]
▶ Sources: Alcoa is in the market for a new office in Pittsburgh   [Sep-17-18 02:08PM  American City Business Journals]
▶ Industrials Are the Good Play Now: Morgan Stanley   [Sep-13-18 06:15AM  TheStreet.com]

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