Critical Contrast: Alcoa (NYSE:AA) and Sigma Lithium (NASDAQ:SGML)

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

Insider and Institutional Ownership

64.9% of Sigma Lithium shares are owned by institutional investors. Comparatively, 82.4% of Alcoa shares are owned by institutional investors. 48.6% of Sigma Lithium shares are owned by company insiders. Comparatively, 0.4% of Alcoa shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of current recommendations and price targets for Sigma Lithium and Alcoa, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sigma Lithium	3	3	2	0	1.88
Alcoa	1	5	7	0	2.46

Sigma Lithium currently has a consensus target price of $14.30, suggesting a potential upside of 52.94%. Alcoa has a consensus target price of $61.00, suggesting a potential upside of 44.32%. Given Sigma Lithium’s higher possible upside, research analysts clearly believe Sigma Lithium is more favorable than Alcoa.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Sigma Lithium	-19.36%	-37.40%	-7.66%
Alcoa	9.48%	18.90%	7.71%

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sigma Lithium	$142.49 million	7.39	-$50.19 million	($0.24)	-38.96
Alcoa	$13.60 billion	0.82	$1.16 billion	$4.86	8.70

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

Volatility and Risk

Sigma Lithium has a beta of 0.67, meaning that its share price is 33% 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.

Summary

Alcoa beats Sigma Lithium on 11 of the 14 factors compared between the two stocks.

About Sigma Lithium

Sigma Lithium Corporation engages in the exploration and development of lithium deposits in Brazil. It holds a 100% interest in the Grota do Cirilo, Genipapo, Santa Clara, and São José properties comprising 29 mineral rights covering an area of approximately 185 square kilometers located in the Araçuaí and Itinga regions of the state of Minas Gerais, Brazil. It serves electric vehicle industries worldwide. The company was formerly known as Sigma Lithium Resources Corporation and changed its name to Sigma Lithium Corporation in July 2021. The company is headquartered in São Paulo, Brazil.

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.