We Might See A Profit From Century Aluminum Company (NASDAQ:CENX) Soon

By
Simply Wall St
Published
January 12, 2022
NasdaqGS:CENX
Source: Shutterstock

With the business potentially at an important milestone, we thought we'd take a closer look at Century Aluminum Company's (NASDAQ:CENX) future prospects. Century Aluminum Company, together with its subsidiaries, produces standard-grade and value-added primary aluminum products in the United States and Iceland. With the latest financial year loss of US$123m and a trailing-twelve-month loss of US$263m, the US$1.6b market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on Century Aluminum's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Century Aluminum

Century Aluminum is bordering on breakeven, according to the 2 American Metals and Mining analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$488m in 2022. So, the company is predicted to breakeven approximately 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 77%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
NasdaqGS:CENX Earnings Per Share Growth January 12th 2022

We're not going to go through company-specific developments for Century Aluminum given that this is a high-level summary, though, bear in mind that by and large a metal and mining business has lumpy cash flows which are contingent on the natural resource mined and stage at which the company is operating. 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 debt-to-equity ratio of 122%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

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 compiled a list of essential factors you should further research:

  1. 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.
  2. 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.
  3. 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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