Is Century Aluminum a Bargain After Its 13% Dip Despite Strong Industry Tailwinds?

• Wondering if Century Aluminum is undervalued or riding high? Let’s break down what’s driving the story behind the stock’s price today.
• After a stellar year-to-date run of 56.4%, the stock has recently cooled off, slipping 13.2% over the past week and 13.6% over the last month. Even so, its one-year gain remains an impressive 26.1%.
• Recent headlines have highlighted favorable industry tailwinds, especially as demand for aluminum in electric vehicles and renewable infrastructure continues to accelerate. At the same time, growing chatter about tariffs and domestic supply investment has put Century Aluminum in the spotlight for both opportunity and volatility.
• On the valuation front, Century Aluminum currently scores 5 out of 6 using our value checks. This suggests it could be trading below its true worth. We’ll explore what’s behind this score in detail, look at several classic approaches to valuation, and ultimately consider a smarter way to determine whether the stock is genuinely a value opportunity by the end of this article.

Find out why Century Aluminum's 26.1% return over the last year is lagging behind its peers.

Approach 1: Century Aluminum Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a widely used valuation approach that estimates a company's intrinsic value by projecting its future cash flows and discounting them back to the present. In the case of Century Aluminum, this model uses the 2 Stage Free Cash Flow to Equity method, providing insight into both current operations and longer-term growth prospects.

Currently, Century Aluminum reports a Free Cash Flow (FCF) of -$54.8 Million, which means the company is cash flow negative at the moment. Looking ahead, analysts forecast that FCF will climb to $370.8 Million by 2027. Beyond this, projections extrapolated by Simply Wall St indicate that FCF could reach approximately $441.4 Million by 2035. These forecasts signal strong anticipated cash generation in the years ahead, based on industry trends and Century’s expected operational performance.

Using this cash flow outlook, the DCF model estimates Century Aluminum’s intrinsic value at $68.16 per share. This implies the stock is trading at a 58.9% discount to its fair value, making it appear significantly undervalued at today's price.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Century Aluminum is undervalued by 58.9%. Track this in your watchlist or portfolio, or discover 894 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Century Aluminum.

Approach 2: Century Aluminum Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular valuation tool for profitable companies because it measures how much investors are willing to pay today for each dollar of current earnings. For companies with consistent profitability, like Century Aluminum, this metric provides a clear snapshot of market expectations and confidence in future growth.

Growth expectations and perceived risk play important roles in shaping what qualifies as a “fair” PE ratio. Faster-growing firms or those seen as less risky typically command higher PE multiples. More mature or volatile companies usually deserve lower figures. This makes context crucial when interpreting whether a PE is high or low.

Century Aluminum currently trades on a PE ratio of 32.39x. Compared to key benchmarks, this sits well above the Metals and Mining industry average of 20.66x but below the peer group average of 42.50x. These benchmarks help frame where the stock stands in its sector, but they don’t tell the full story.

Simply Wall St’s “Fair Ratio” addresses this by calculating what a reasonable PE multiple should be, tailored to factors like Century’s earnings growth outlook, risk profile, profit margin, market cap, and its industry landscape. This holistic approach provides a more accurate view than simply comparing to broad industry or peer numbers because it accounts for what really matters to long-term value.

For Century Aluminum, the Fair Ratio stands at 37.38x. With the company’s current PE at 32.39x, that is a notable discount, indicating the market may be underestimating Century’s earnings potential relative to its fundamentals and growth prospects.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1417 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Century Aluminum Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives.

A Narrative is a clear, personalized story that connects your view of a company's future, based on your assumptions for growth, profit, and industry risks, to detailed financial forecasts and a fair value estimate. Instead of relying solely on traditional ratios or analyst targets, Narratives empower you to turn your unique perspective into a quantitative forecast and assess what you think the company is truly worth.

Available directly within the Simply Wall St Community, Narratives make investment decision-making accessible to everyone by letting you compare the Fair Value from your forecast against the current price. This allows you to see at a glance when a stock looks attractive to you. In addition, because Narratives are updated as new information arrives, they remain relevant for changing markets.

For Century Aluminum, for instance, one community member might build a bullish Narrative with aggressive margin expansion and robust demand, leading to a Fair Value of $36. Another might factor in higher risks and industry headwinds, producing a more conservative estimate around $27. Narratives let you quickly see, compare, and act on the story that best fits your view of the company’s future.

Do you think there's more to the story for Century Aluminum? Head over to our Community to see what others are saying!

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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