Century Aluminum (CENX): Assessing Valuation After Analyst Upgrades and Fed Rate Cut Boost Investor Sentiment

Century Aluminum (CENX) has caught the eye of investors lately, and for good reason. A recent surge in analyst earnings estimates, along with its ranking as a leading pick in its sector, has put the company in the spotlight. With robust cash flow and an improved earnings outlook, it is no surprise the stock is being discussed in momentum circles. Adding to this is a wave of market optimism prompted by a recent Fed rate cut, and there is clearly a confluence of factors shaping sentiment around Century Aluminum right now.

Taking a broader view, the stock has showcased significant momentum this year, with gains building over both the short and longer term. While several companies in the industrial space have seen their fortunes rise alongside market optimism, Century Aluminum’s year-to-date return outstrips many of its peers, suggesting that momentum is more than just a recent blip. Between positive earnings revisions and a string of upbeat news, many investors are now assessing whether the optimism around Century Aluminum may continue.

The big question for investors is this: with the recent rally and all this enthusiasm, is Century Aluminum currently undervalued, or has the market already priced in another wave of growth?

Most Popular Narrative: 3.7% Overvalued

According to the most popular narrative, Century Aluminum is currently viewed as modestly overvalued. Analysts have raised fair value estimates on the back of upgraded revenue growth and margin expectations, but today’s price sits slightly above their consensus target.

The expansion and restart of Mt. Holly, along with progress on a new U.S. smelter, positions Century Aluminum to meaningfully increase U.S. primary aluminum production. This enables the company to capture rising domestic demand driven by reshoring of supply chains and incentives such as government tariffs and trade protections. These factors support future revenue growth and improved fixed cost absorption, thus enhancing net margins.

What turns a traditional aluminum producer into a high-potential play? There is a crucial growth hypothesis in play, hinging on production restarts, market incentives, and ambitious financial forecasts. Want to uncover which future margin assumptions and growth drivers help define that “fair value” price? The story behind these projections just might surprise you.

Result: Fair Value of $27.00 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, continued reliance on tariffs and exposure to volatile energy costs could quickly shift the outlook for Century Aluminum in the future.

Find out about the key risks to this Century Aluminum narrative.

Another View: Discounted Cash Flow Perspective

Looking from a different angle, our DCF model suggests a completely opposite story, indicating that Century Aluminum may be trading well below its fair value. Could the market be missing something? Is this a rare mispricing?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Century Aluminum for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Century Aluminum Narrative

If you see the story playing out differently, or you want to build your own case backed by the numbers, you can assemble your own version in just a few minutes with Do it your way.

A great starting point for your Century Aluminum research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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