Century Aluminum Is Hugely Undervalued

Century Aluminum (NASDAQ:CENX) is one stock that I truly believe is extremely undervalued on a series of valuation metrics. It is my belief that share price of the company may double up from its current levels within the next few months.

I do agree that share price of Century Aluminum is beaten down by 60 percent this year but you should also see that performance of the company is now significantly improving on all metrics — peer valuation, book value, earnings, and free cash flow — after commodity price weakness and union problems brought it down for a while. In short, I will argue that the stock price of Century Aluminum is a must-have investment at the present-day price.

Here are some more reasons why I believe Century Aluminum should be your next stock purchase option. The company reported $73.8m as quarterly profit for Q1 that was a huge improvement from a loss of $20.1m in the previous year and up 19.4 percent over the previous quarter. It is no news to anyone that aluminum pricing had suffered its huge declines by the turn of the year and the Q1 profit figure is the best reflection of this company’s profits going forward. Century Aluminum, on a trailing twelve-month basis, reported $2.15 in earnings per share. The company is presently valued at just 5.4 times earnings at the current share price of $11.59.

I would further like to draw your attention to the table below that reveals that Century Aluminum (NASDAQ:CENX) has successfully managed to deliver strong profit and revenue growth while the ROE has dramatically improved over the last two years.

Mar 2015Dec 2014Sep 2014June 2014Mar 2014Dec 2013Sep 2013June 2013
Total Revenue587.9551.2500.6458.3420.8401.2399.9331.9
Net Income73.861.850.420.3(20.1)(9.7)(9.5)(29.4)
Total Equity1,138.91,091.11,054.31,003.6983.11,002.8965.5968.9
Annualized ROE25.91%22.65%19.12%8.09%-8.17%-3.86%-3.93%-12.13%

The company’s free cash flow also improved significantly in the last two years. The company has generated $322.9m in cash on a trailing twelve-month basis that is surely a positive signal for all investors like me.


Century Aluminum is valued below its book value and is expected to reduce the share count by after repurchasing $19.4m worth of stock in Q1. The stock should double in value if the company is able to continue strong performances. I am long CENX at $11.66.


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