We feel now is a pretty good time to analyse Century Aluminum Company's (NASDAQ:CENX) business as it appears the company may be on the cusp of a considerable accomplishment. Century Aluminum Company, together with its subsidiaries, produces standard-grade and value-added primary aluminum products in the United States and Iceland. On 31 December 2020, the US$1.2b market-cap company posted a loss of US$123m for its most recent financial year. The most pressing concern for investors is Century Aluminum's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
According to the 3 industry analysts covering Century Aluminum, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$13m in 2021. So, the company is predicted to breakeven approximately a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 116% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for Century Aluminum given that this is a high-level summary, however, take into account that generally metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we would like to bring into light with Century Aluminum is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Century Aluminum's case is 57%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
There are key fundamentals of Century Aluminum which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Century Aluminum, take a look at Century Aluminum's company page on Simply Wall St. We've also put together a list of relevant factors you should further examine:
- Valuation: What is Century Aluminum worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Century Aluminum is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Century Aluminum’s board and the CEO’s background.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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