ThyssenKrupp (OTCMKTS:TKAMY) vs. Alcoa (NYSE:AA) Critical Analysis

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

Analyst Recommendations

This is a summary of recent ratings and price targets for ThyssenKrupp and Alcoa, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ThyssenKrupp	2	1	3	2	2.62
Alcoa	1	6	6	0	2.38

Alcoa has a consensus target price of $58.23, suggesting a potential upside of 42.46%. Given Alcoa’s higher probable upside, analysts plainly believe Alcoa is more favorable than ThyssenKrupp.

Dividends

ThyssenKrupp pays an annual dividend of $0.11 per share and has a dividend yield of 0.7%. Alcoa pays an annual dividend of $0.40 per share and has a dividend yield of 1.0%. ThyssenKrupp pays out 20.4% of its earnings in the form of a dividend. Alcoa pays out 6.9% 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. Alcoa is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares ThyssenKrupp and Alcoa”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ThyssenKrupp	$36.31 billion	0.26	$514.57 million	$0.54	27.93
Alcoa	$14.31 billion	0.75	$1.16 billion	$5.79	7.06

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

Volatility & Risk

ThyssenKrupp has a beta of 1.49, suggesting that its share price is 49% more volatile than the S&P 500. Comparatively, Alcoa has a beta of 1.83, suggesting that its share price is 83% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
ThyssenKrupp	0.89%	5.85%	2.14%
Alcoa	10.77%	24.58%	10.03%

Institutional & Insider Ownership

82.4% of Alcoa shares are held by institutional investors. 0.4% of Alcoa shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Summary

Alcoa beats ThyssenKrupp on 13 of the 17 factors compared between the two stocks.

About ThyssenKrupp

thyssenkrupp AG is a Germany-based industrial group formed in 1999 through the merger of Thyssen AG and Friedrich Krupp AG. The company has roots in the 19th-century steel and engineering industries and is headquartered in Essen, Germany. Its businesses span steel production and processing, materials distribution, automotive components and systems, industrial technologies, and marine systems. The group also develops technologies for areas such as industrial decarbonization and hydrogen production. thyssenkrupp serves customers across a range of industries and operates in markets around the world, with activities and customers in Europe and other international regions.

About Alcoa

Alcoa Corporation is an integrated aluminum company involved in bauxite mining, alumina refining and primary aluminum production. Its products include bauxite, alumina and aluminum in forms used by customers across industries such as transportation, packaging, construction and consumer goods. The company operates internationally, with activities spanning North America, South America, Europe and Australia. Its business connects raw-material production with refining and smelting, serving customers in markets around the world.