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Trade-Ideas: Alcoa (AA) Is Today's Momo Momentum Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Alcoa ( AA) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified Alcoa as such a stock due to the following factors:

  • AA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $309.9 million.
  • AA has a PE ratio of 63.8.
  • AA is currently in the upper 30% of its 1-year range.
  • AA is in the upper 25% of its 20-day range.
  • AA is in the upper 35% of its 5-day range.
  • AA is currently trading above yesterday's high.
  • AA has experienced a gap between today's open and yesterday's close of 0.2%.

'Momo Momentum' stocks are valuable stocks to watch for a variety of reasons including historical back testing and price action. Market technicians refer to such stocks as being in a mark-up phase before a possible distribution period and price decline. Technical analysts and traders frequently find that the factors referenced above tend to create a temporary burst of strong wind in a stock's sail. Nevertheless, all successful traders must excel at maximizing gains while keeping losses to an absolute minimum. For that reason, the holding period on momo momentum stocks must always be a primary consideration, and this part of the puzzle is ultimately at the discretion of each individual's risk tolerance and portfolio risk management skills.

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More details on AA:

Alcoa Inc. engages in the production and management of primary aluminum, fabricated aluminum, and alumina. The company operates in four segments: Alumina, Primary Metals, Global Rolled Products, and Engineered Products and Solutions. The stock currently has a dividend yield of 1.4%. AA has a PE ratio of 63.8. Currently there are 4 analysts that rate Alcoa a buy, 4 analysts rate it a sell, and 6 rate it a hold.

The average volume for Alcoa has been 19.6 million shares per day over the past 30 days. Alcoa has a market cap of $8.9 billion and is part of the basic materials sector and metals & mining industry. The stock has a beta of 1.80 and a short float of 11.3% with 3.67 days to cover. Shares are down 4.4% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Alcoa as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, impressive record of earnings per share growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 116.8% when compared to the same quarter one year prior, rising from -$143.00 million to $24.00 million.
  • ALCOA INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALCOA INC reported lower earnings of $0.17 versus $0.52 in the prior year. This year, the market expects an improvement in earnings ($0.35 versus $0.17).
  • Net operating cash flow has decreased to $214.00 million or 18.63% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ALCOA INC has marginally lower results.
  • AA has underperformed the S&P 500 Index, declining 6.43% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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