Alcoa Inc (AA), Allegheny Technologies Incorporated (ATI): Low Return Businesses

Maybe one day the investments will pay off, but shareholders should not get their hopes up. All of the money that these companies have poured back into their businesses over the years has earned a lower return for shareholders than if management had simply purchased treasury bonds in the case of Alcoa Inc (NYSE:AA) and Century Aluminum Co (NASDAQ:CENX), and lower than a broad-based equity index fund would have returned in the case of Allegheny Technologies Incorporated (NYSE:ATI). In other words, shareholders would have been better off if management had decided to invest in the stock market rather than in the business.

Bottom line

Growth can destroy value just as easily as it can add value. Shareholders should not simply look to see how quickly a company is growing, but should also look to see how much value that growth is creating. In the case of Alcoa, Allegheny Technologies Incorporated (NYSE:ATI), and Century Aluminum Co (NASDAQ:CENX), growth is not creating any value whatsoever.

The article When Growth Destroys Value originally appeared on Fool.com and is written by Ted Cooper.

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