Does The Recent 5.6% Pullback Offer Opportunity in Kaiser Aluminum?

• Ever caught yourself wondering if Kaiser Aluminum is actually a bargain right now? You are not alone. Today's action is making that question even more interesting.
• Despite a dip of 5.6% in the last week, the stock is up 12.2% over the past month and has delivered a solid 27.7% year-to-date return. This shows there is real momentum, but also some volatility.
• Much of this movement has followed positive updates in the U.S. industrial and manufacturing sectors, where aluminum demand continues to get a boost from infrastructure projects and vehicle electrification trends. Recent headlines on trade developments and supply chain resilience have added to the conversation around growth potential and risk for stocks like Kaiser Aluminum.
• Looking at fundamentals, Kaiser Aluminum scores a 5 out of 6 on our valuation checks, signaling it is undervalued in nearly every major category. In this article, we will break down how analysts typically value the stock and discuss a smarter, more intuitive way to spot true value by the end.

Find out why Kaiser Aluminum's 16.4% return over the last year is lagging behind its peers.

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

The Discounted Cash Flow (DCF) model is a core valuation tool that estimates a company's intrinsic value by projecting its future cash flows and then discounting them to reflect what they are worth today. For Kaiser Aluminum, this approach uses a two-stage method to extrapolate future Free Cash Flow based on both analyst forecasts and further in-house projections.

Currently, Kaiser Aluminum generates Free Cash Flow of approximately $6.7 million. Analyst estimates are available up to 2027, with projected Free Cash Flow reaching $164.5 million by the end of that year. Beyond that, Simply Wall St extends the projections out to 2035, anticipating a steady, modest growth in cash generation.

After discounting all these future cash flows back to present value using relevant rates, the DCF model suggests an intrinsic value of $127.94 per share. The current market price reflects a 29.9% discount to this estimated value. This result indicates that Kaiser Aluminum stock is significantly undervalued at present.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Kaiser Aluminum is undervalued by 29.9%. Track this in your watchlist or portfolio, or discover 905 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 Kaiser Aluminum.

Approach 2: Kaiser Aluminum Price vs Earnings (PE) Ratio

The Price-to-Earnings (PE) ratio is a favored valuation tool when analyzing profitable companies, since it compares a stock’s current price to its annual earnings and offers a clear view of how the market values its profit potential.

Growth prospects and risk both play critical roles in determining what counts as a “normal” or “fair” PE ratio. Companies with strong future earnings growth and stable financials usually command higher PE ratios, while those facing headwinds or greater risks often trade at lower multiples.

Kaiser Aluminum’s current PE ratio is 16.9x, placing it below both the Metals and Mining industry average of 20.6x and the average among direct peers at 44.9x. At first glance, this could suggest the stock is trading at a discount, but relative comparisons only tell part of the story.

To provide a more tailored benchmark, Simply Wall St uses a “Fair Ratio,” in this case 19.6x, which incorporates the company’s own fundamentals like earnings growth, profit margins, risk profile, and size, instead of relying solely on peers or the broad industry. This proprietary ratio aims to reflect what investors should actually pay given Kaiser Aluminum's specific outlook.

Comparing Kaiser Aluminum’s 16.9x multiple to its Fair Ratio of 19.6x shows that the stock trades notably below where Simply Wall St estimates it should. This points to meaningful undervaluation using a more nuanced, company-specific lens.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1416 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Kaiser Aluminum Narrative

Earlier we mentioned there is an even better way to understand valuation. Let's introduce you to Narratives. A Narrative is a personal story that you, as an investor, build around a company by connecting your perspective—what you believe about its future revenue, earnings, and margins—with your estimate of fair value. Narratives make it easy to tie together a company’s story, a detailed financial forecast, and a resulting fair value, all in one seamless view.

On Simply Wall St’s Community page, millions of investors use Narratives as a practical tool to compare their own outlook with others. By contrasting your Narrative’s fair value with the current price, you know exactly when the stock matches your investment thesis. This can help you make smarter buy or sell decisions. Narratives are instantly updated with fresh information whenever news breaks or new earnings are announced, so your assessment is always relevant.

For example, one investor’s Narrative for Kaiser Aluminum might assume industry-leading revenue growth and a $150 fair value, while another takes a more conservative approach, projecting underperformance and a $110 fair value. With Narratives, you can align your investing strategy with your own vision and stay ahead in an ever-changing market.

Do you think there's more to the story for Kaiser 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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