Century Aluminum Co (NASDAQ: CENX) investors have enjoyed seeing the stock price increase by 17.6% over the last month. As a small-cap stock with decent coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at the company’s expected growth and valuation based on its most recent financial data to see if there is further upside moving forward.
What’s The Opportunity In Century Aluminum?
Welcoming news for investors, Century Aluminum is still trading at a fairly cheap price. According to our 9 valuation analyses, the intrinsic value for the stock is $23.39 per share and is currently trading at $17.68 in the market. This means that there is still an opportunity to buy now.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$26.91||52.2%|
|5-yr DCF Revenue Exit||$27.78||57.1%|
|Peer Revenue Multiples||$21.22||20.0%|
|10-yr DCF EBITDA Exit||$26.06||47.4%|
|5-yr DCF EBITDA Exit||$26.43||49.5%|
|Peer EBITDA Multiples||$16.04||-9.3%|
|10-yr DCF Growth Exit||$24.37||37.8%|
|5-yr DCF Growth Exit||$23.77||34.5%|
|Peer P/E Multiples||$17.90||1.3%|
Click on any of the analyses above to view the latest model with real-time data.
Century Aluminum’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta of 1.00. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can We Expect Growth From Century Aluminum?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matters the most, a more compelling investment thesis would be high growth potential at a cheap price.
source: finbox.io data explorer
With net income expected to grow at an average rate of 32.8% over the next couple years, the future certainly appears bright for Century Aluminum. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher stock valuation.
What This Means For Investors
Growth investors typically look to invest in companies that are expanding sales, gaining market share and building customer bases. On the other hand, value investors often argue that the most successful investments are in companies that deliver the highest cash flows while trading at the lowest valuation.
But why not put those hands together? A company that has both growth and value characteristics would certainly make the most attractive investment. So what did we find out about Century Aluminum?
Century Aluminum’s optimistic future growth does not appear to have been fully factored into the current share price with the stock still trading below its intrinsic value. Therefore, it may be a good time to purchase shares or increase your position in the company.
It is important to note that there are a variety of other fundamental factors that I have not taken into consideration in this article. If you have not done so already, I highly recommend that you complete your research on Century Aluminum by taking a look at the following:
Valuation Metrics: what is Century Aluminum’s short ratio and how does it compare to its publicly traded peers? It represents the percentage of total shares outstanding that is being shorted. View the short ratio here.
Risk Metrics: how much interest coverage does Century Aluminum have? This is a ratio used to assess a firm’s ability to pay interest expenses based on operating profits (EBIT). View the company’s interest coverage here.
Efficiency Metrics: fixed asset turnover is calculated by dividing revenue by average fixed assets. View Century Aluminum’s fixed asset turnover here.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.