Analyzing Centerra Gold (NYSE:CGAU) and Alcoa (NYSE:AA)

Centerra Gold (NYSE:CGAU) 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 earnings, dividends, risk, profitability, institutional ownership, valuation and analyst recommendations.

Dividends

Centerra Gold pays an annual dividend of $0.20 per share and has a dividend yield of 1.0%. Alcoa pays an annual dividend of $0.40 per share and has a dividend yield of 1.0%. Centerra Gold pays out 9.3% 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.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Centerra Gold and Alcoa, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Centerra Gold	1	0	4	0	2.60
Alcoa	1	6	6	0	2.38

Centerra Gold presently has a consensus target price of $21.00, suggesting a potential upside of 3.75%. Alcoa has a consensus target price of $58.23, suggesting a potential upside of 48.81%. Given Alcoa’s higher probable upside, analysts clearly believe Alcoa is more favorable than Centerra Gold.

Institutional and Insider Ownership

55.4% of Centerra Gold shares are held by institutional investors. 0.2% of Centerra Gold shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Centerra Gold	$1.83 billion	2.16	$583.99 million	$2.15	9.41
Alcoa	$12.83 billion	0.80	$1.16 billion	$5.79	6.76

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

Volatility & Risk

Centerra Gold has a beta of 0.84, meaning that its share price is 16% less volatile than the S&P 500. Comparatively, Alcoa has a beta of 1.74, meaning that its share price is 74% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Centerra Gold	23.67%	15.30%	10.60%
Alcoa	10.77%	24.58%	10.03%

Summary

Alcoa beats Centerra Gold on 9 of the 16 factors compared between the two stocks.

About Centerra Gold

Centerra Gold Inc., a gold mining company, engages in the acquisition, exploration, development, and operation of gold and copper properties in North America, Turkey, and internationally. The company explores for gold, copper, and molybdenum deposits. Its flagship projects are the 100% owned Mount Milligan gold-copper mine located in British Columbia, Canada; and the Öksüt gold mine located in Turkey. The company was incorporated in 2002 and is based 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.