The Bullish Case for Alcoa Corporation (AA)

A key level of resistance has formed in the chart of Alcoa Corporation (AA).  A breakout is expected, if this level is breached…

Alcoa Corporation (AA) is a vertically integrated aluminum company involved in every phase of aluminum production, including bauxite mining, alumina refining, and the manufacture of primary aluminum.

The company reported its latest financial results last month, and earnings and revenues came in ahead of expectations, but the company provided a weak forecast for the months ahead. AA reported a third-quarter loss of $1.17 per share with revenue of $2.37 billion. The firm has been hit hard by the coronavirus pandemic, which led to a decline in industrial production and a fall in demand for aluminum.

AA had current assets of $4.1 billion at the end of the quarter, compared with current liabilities of $2.3 billion, so the company has enough cash and assets to cover short-term liabilities. The company has a negative profit margin and return on equity.

The firm grew both earnings and revenue in its most recent quarter, but EPS is negative and revenues are not expected to grow much next year. Since earnings are negative, we can’t calculate P/E, but the company has a low Price to Sales ratio of 0.25.

AA has shown strong near and mid term momentum, but is down over 35% for the year. This has led to a “Sell” rating in our POWR Ratings system, but that may change as we take a look at the 1-year chart of AA below with the added notations…

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