Cheap aluminium producer - a tough choice between Alcoa and its Chinese counterparts

After the oil bubble peaked in 2008, virtually all commodities took a nosedive. Aluminum was no exception, falling from a peak of $3,070 per metric ton in August 2008 to a low of $1,340 in February 2009. Since then, it has rebounded to just above $2,000 per metric ton, or about 35% below its peak.

However, the share price of aluminum producer, Alcoa Inc. has not rebounded accordingly. On the contrary, it keeps getting cheaper, currently trading for under $8.50 per share, a long way down from its pre-crash peak of $48.77. In other words, the stock is still almost 83% off from peak levels.

Over the past several years, Alcoa Inc. has taken measures to cut costs that analysts generally think will begin to show results in 2013. Alcoa Inc. is projected to earn 61 cents per share for 2013, meaning the stock is trading for 13.8 times forward earnings, which are expected to grow to 87 cents and 94 cents in 2014 and 2015, respectively, for an average forward growth rate of 25.3%. While these are ambitious and somewhat uncertain predictions, if these were to prove accurate, earnings growth like this should do wonders for the share price.

The alternatives for those who are considering Alcoa are its Chinese alternatives such as Aluminum Corp. of China Limited.

Aluminum Corp. of China Limited is forecast to lose money for the next three fiscal years. While this stock could produce great profits long-term, it is simply not worth the risk.

As far as a pure aluminum play goes, Alcoa is a great way to play the growing infrastructure and transportation needs around the world. Historically, Alcoa trades at around 16-17 times earnings, so if the consensus is correct, Alcoa could easily be a $15 stock in a couple of years.