When a company trades for below its book value, the stock’s total market capitalization is less than the total worth of the company. Below are five companies trading below their price to book value. These five stocks were chosen because they represent a contrarian view in that investors are underappreciating a positive catalyst on the horizon for each company.
Alcoa Inc. (AA) – Alcoa Inc. is an aluminum company that is currently trading below its book value. The current price to book ratio is 0.76, which is trading at less than the industry ratio of 1.14. The volatility of the company is higher than the market, however, with a beta of 2.01. With earnings per share of $0.95, AA has a price to earnings ratio of 11.2. This is well below the industry average of 44.3 and the S&P 500’s ratio of 18.9. While being considered underpriced based on these ratios, AA does also offer a dividend to investors. The annual dividend of $0.12 gives the stock a yield of 1.10%. Comparing AA to its competitor Aluminum Corporation of China Limited (ACH), AA has the higher net income of $1.06 billion compared to $210.12 million. In addition, ACH has a much higher price to earnings ratio of 36.2. With the company’s upgrades in Canada, AA looks to drive down costs as well as increase output, increasing the profit margin as well as the company’s net income.