McEwen (NYSE:MUX) versus Alcoa (NYSE:AA) Critical Analysis

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

Insider and Institutional Ownership

17.0% of McEwen shares are held by institutional investors. 14.8% of McEwen shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent recommendations for McEwen and Alcoa, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
McEwen	0	2	2	0	2.50
Alcoa	1	5	8	0	2.50

McEwen presently has a consensus target price of $29.50, indicating a potential upside of 88.80%. Alcoa has a consensus target price of $60.54, indicating a potential upside of 51.41%. Given McEwen’s higher possible upside, research analysts clearly believe McEwen is more favorable than Alcoa.

Valuation and Earnings

This table compares McEwen and Alcoa”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
McEwen	$197.55 million	4.85	$34.43 million	$1.26	12.40
Alcoa	$12.83 billion	0.82	$1.16 billion	$4.86	8.23

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
McEwen	32.46%	13.48%	9.13%
Alcoa	9.48%	18.90%	7.71%

Risk and Volatility

McEwen has a beta of 1.26, indicating that its share price is 26% more volatile than the S&P 500. Comparatively, Alcoa has a beta of 1.74, indicating that its share price is 74% more volatile than the S&P 500.

Summary

McEwen beats Alcoa on 7 of the 13 factors compared between the two stocks.

About McEwen

McEwen Mining Inc. engages in the exploration, development, production, and sale of gold and silver. It also explores for copper deposits. The company owns 100% interests in the El Gallo and Fenix projects located in Mexico; and the Black Fox Mine and Stock Mill, Grey Fox, and Froome and Tamarack properties in Canada. It also owns interests in the Fuller, Davidson-Tisdale, Buffalo Ankerite, and Paymaster exploration properties located in Canada; and a 49% interest in the San José mine located in Argentina. In addition, the company owns 100% interests in the Gold Bar and Tonkin properties located in Eureka County, Nevada; and interests in the Los Azules copper project located in the cordilleran region in the province of San Juan, Argentina. The company was formerly known as US Gold Corporation and changed its name to McEwen Mining Inc. in January 2012. McEwen Mining Inc. was founded in 1979 and is headquartered in Toronto, Canada.

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.