One Reason Why Alcoa (AA) Stock Is Higher Today
NEW YORK (TheStreet) -- Shares of Alcoa (AA) - Get Report are rising 2.75% to $9.53 in late-afternoon trading on Friday as Gabelli contends that the stock is trading at a 30% discount to the firm's 2016 price-to-sales ratio of $11.80, Barron's reports.
The price-to-sale value reflects 2016 upstream and downstream trading volumes after the aluminum producer separates its assets business from its mining, refining and smelting business later this year, the firm noted.
"Hidden assets frame the disconnect between Alcoa's current trading value and the potential trading value of the pieces post-separation," Gabelli said in a note cited by Barron's. "Notably, energy assets and above normal casthouse exposure are worth over $1.25 ps."
After the company splits its businesses, the firm believes that New Alcoa might merge with Rio Tinto's (RIO) aluminum business or with South32 (SHTLF).
Separately, TheStreet Ratings team rates the stock as a "hold" with a ratings score of C.
Alcoa's strengths such as its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including poor profit margins, weak operating cash flow and a generally disappointing performance in the stock itself.
You can view the full analysis from the report here: AA
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.