Should you invest in Alcoa stock after initiating a share buyback program?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 15, 2021
  • Alcoa shares on Friday spiked nearly 14% after announcing its most recent quarterly results.
  • The company reported its fiscal Q3 revenue and earnings Thursday after markets opened, beating estimates.
  • The company also initiated a share buyback program to return capital to shareholders.

On Friday, Alcoa Corp (NYSE:AA) shares skyrocketed nearly 14% after announcing its most recent quarterly results. The company reported solid fiscal Q3 revenue and earnings, beating analyst expectations. Alcoa also announced a share buyback program whilst initiating a quarterly dividend payment.

Alcoa posted fiscal Q3 non-GAAP earnings per share of $2.05, beating the consensus Street estimate of $1.80. In addition, its GAAP EPS of $1.76, outperformed the average for analyst expectations of $1.68, while revenue for the quarter grew by 31.2% Y/Y to $3.11 billion, $190 million ahead of estimates.

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The aluminium producer also announced a share buyback program to return $500 million to shareholders, whilst also initiating a quarterly dividend payment of $0.10 per share. 

Alcoa looks undervalued

From a valuation perspective, Alcoa shares still trade at an attractive forward P/E ratio of 9.19 following Friday’s sharp spike. Therefore, value investors could find the stock as an exciting option for their portfolios. 

Moreover, with analysts expecting the company’s earnings per share to grow by about 85% this year, the stock could also gain the attention of growth investors.

Therefore, although Alcoa is up more than 137% this year and nearly 350% over the last 12 months, there could be time left to buy ahead of its exciting growth prospects.

Source – TradingView

Technically, Alcoa shares seem to have recently spiked to trade closer to the overbought conditions of the 14-day RSI. The stock found trendline support, bouncing off to surge towards its 2018 highs.

However, with shares yet to retest the trendline resistance, the current rally could continue for the foreseeable future.

Therefore, investors could target extended gains at about $60.68, while $51.08 and $45.51 are crucial support zones.

It may not be too let to buy Alcoa shares

In summary, although Alcoa shares have rallied significantly this year, the stock still trades at an exciting forward P/E ratio of just 9.19.

In addition, with shares yet to retest the trendline resistance, there could be time left to buy the stock amid its exciting earnings growth.

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