Critical Review: Alcoa (NYSE:AA) and Centerra Gold (NYSE:CGAU)

Alcoa (NYSE:AA) and Centerra Gold (NYSE:CGAU) are both materials companies, but which is the superior stock? We will compare the two businesses based on the strength of their earnings, risk, valuation, profitability, dividends, analyst recommendations and institutional ownership.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Alcoa and Centerra Gold, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Alcoa	1	6	6	0	2.38
Centerra Gold	1	1	5	0	2.57

Alcoa presently has a consensus price target of $58.23, suggesting a potential upside of 51.69%. Centerra Gold has a consensus price target of $21.00, suggesting a potential upside of 3.40%. Given Alcoa’s higher probable upside, research analysts clearly believe Alcoa is more favorable than Centerra Gold.

Dividends

Alcoa pays an annual dividend of $0.40 per share and has a dividend yield of 1.0%. Centerra Gold pays an annual dividend of $0.20 per share and has a dividend yield of 1.0%. Alcoa pays out 6.9% of its earnings in the form of a dividend. Centerra Gold pays out 6.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Earnings and Valuation

This table compares Alcoa and Centerra Gold”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Alcoa	$12.83 billion	0.79	$1.16 billion	$5.79	6.63
Centerra Gold	$1.38 billion	2.87	$583.99 million	$3.13	6.49

Alcoa has higher revenue and earnings than Centerra Gold. Centerra Gold is trading at a lower price-to-earnings ratio than Alcoa, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Alcoa has a beta of 1.74, indicating that its share price is 74% more volatile than the S&P 500. Comparatively, Centerra Gold has a beta of 0.84, indicating that its share price is 16% less volatile than the S&P 500.

Profitability

This table compares Alcoa and Centerra Gold’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Alcoa	10.77%	24.58%	10.03%
Centerra Gold	36.92%	15.35%	10.73%

Institutional and Insider Ownership

55.4% of Centerra Gold shares are owned by institutional investors. 0.2% of Centerra Gold shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

Alcoa beats Centerra Gold on 9 of the 16 factors compared between the two stocks.

About Alcoa

Alcoa Corporation, together with its subsidiaries, produces and sells bauxite, alumina, and aluminum products in the United States, Spain, Australia, Iceland, Norway, Brazil, Canada, and internationally. The company operates through two segments, Alumina and Aluminum. It engages in bauxite mining operations; and processes bauxite into alumina and sells it to customers who process it into industrial chemical products, as well as aluminum smelting and casting businesses. The company offers primary aluminum in the form of alloy ingot or value-add ingot to customers that produce products for the transportation, building and construction, packaging, wire, and other industrial markets; and flat-rolled aluminum in the form of sheet, which is sold primarily to customers that produce beverage and food cans. In addition, it owns hydro power plants that generates and sells electricity in the wholesale market to traders, large industrial consumers, distribution companies, and other generation companies. The company was formerly known as Alcoa Upstream Corporation and changed its name to Alcoa Corporation in October 2016. The company was founded in 1886 and is headquartered in Pittsburgh, Pennsylvania.

About Centerra Gold

Centerra Gold Inc., a gold mining company, engages in the acquisition, exploration, development, and operation of gold and copper properties in North America, Turkey, and internationally. The company explores for gold, copper, and molybdenum deposits. Its flagship projects are the 100% owned Mount Milligan gold-copper mine located in British Columbia, Canada; and the Öksüt gold mine located in Turkey. The company was incorporated in 2002 and is based in Toronto, Canada.