With all of these factors considered, the (potential) aggregate effect suggests that Alcoa
is undervalued by at least 40%. $12 to $15 per share seems more reasonable. This also assumes an 8 times forward multiple on 2013 EBITDA, which is .5 lower than the company’s historical average.It’s also worth noting that this is all based on the assumption that aluminum prices will rebound. While Alcoa can’t control this aspect of its business, the company’s management nonetheless makes this a great bet. And a modest yield of 1.3% doesn’t hurt either.
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