With a notable daily gain of 14.02% and a three-month gain of 71.37%, Century Aluminum Co (CENX, Financial) has been making waves in the market. However, the company's Loss Per Share stands at 2.04, posing a crucial question for investors: Is Century Aluminum Co's stock fairly valued? This article delves into a valuation analysis to provide insights into the company's market standing. Read on to discover whether the current stock price reflects Century Aluminum Co's intrinsic value.
Company Introduction
Century Aluminum Co produces primary aluminum and operates smelter facilities in the United States and Iceland. Its primary customer, Glencore, purchases the majority of Century Aluminum Co's North American production. The company also boasts a variety of products, including high purity aluminum and value-added billet, and owns a carbon anode production facility in the Netherlands. Currently, Century Aluminum Co's stock trades at $11.79, closely aligned with the GF Value of $11.94, suggesting a fair valuation. This introduction sets the stage for an in-depth analysis of Century Aluminum Co's intrinsic value, blending financial metrics with key company insights.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value. It factors in historical trading multiples, a GuruFocus adjustment based on the company's past performance and growth, and projected future business performance. This valuation method suggests that if a stock's price significantly deviates from the GF Value Line, it could indicate overvaluation or undervaluation, influencing future returns. For Century Aluminum Co, the current share price suggests that the stock is fairly valued. This assessment implies that the long-term return on Century Aluminum Co's stock may align with the company's business growth rate.
Financial Strength and Risks
A thorough review of a company's financial strength is vital to avoid the high risk of permanent capital loss. Century Aluminum Co's financial strength is rated 4 out of 10, with a concerning cash-to-debt ratio of 0.14. This ratio ranks lower than 88.77% of peers in the Metals & Mining industry, indicating a weaker financial position that may present risks to investors.
Profitability and Growth Prospects
Investing in profitable companies, particularly those with a history of consistent profitability, generally carries less risk. However, Century Aluminum Co's profitability is ranked at 4 out of 10, which is less than ideal. The company has been profitable in 2 out of the past 10 years, with a recent annual revenue of $2.20 billion but a Loss Per Share of $2.04. Its operating margin of -1.27% also falls below industry standards. Nevertheless, Century Aluminum Co's growth has been promising, with a 3-year average annual revenue growth of 13.7% and an EBITDA growth rate of 79.6%, indicating potential for future value creation.
Evaluating ROIC and WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can provide insights into its profitability. Century Aluminum Co's ROIC of -1.82 is significantly lower than its WACC of 13.42, indicating that the company is not creating value for its shareholders, which is a concerning sign for potential investors.
Conclusion
In conclusion, Century Aluminum Co (CENX, Financial) appears to be fairly valued based on current market prices. Despite this, the company's financial condition and profitability are less than ideal, although its growth outperforms a large portion of its industry peers. For a more detailed understanding of Century Aluminum Co's financial health, investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
