Buy Or Fear Century Aluminum Stock?

Forbes

3 days ago

Photo byCentury Aluminum (NASDAQ:CENX) stock appears to be hazardous – making it a poor selection to acquire at its current price of approximately $22. We have identified several issues with CENX stock that render it risky, even though its current valuation is considered low.
We reach our conclusion by evaluating the present valuation of CENX stock alongside its operational performance in recent years as well as its existing and historical financial situation. Our examination of Century Aluminum based on critical metrics of Growth, Profitability, Financial Stability, and Downturn Resilience indicates that the company has a subpar operational performance and financial standing, as outlined below. Nevertheless, for investors seeking lower volatility compared to individual stocks, the Trefis High Quality portfolio offers an alternative, having outperformed the S&P 500 and achieved returns surpassing 91% since its inception.
How Does Century Aluminum's Valuation Compare to The S&P 500?
Considering what you pay per dollar of sales or profit, CENX stock appears inexpensive when compared to the broader market.
• Century Aluminum has a price-to-sales (P/S) ratio of 0.9 compared to a figure of 3.1 for the S&P 500
• Additionally, it has a price-to-earnings (P/E) ratio of 17.3 versus the benchmark's 26.9
How Have Century Aluminum's Revenues Grown In Recent Years?
Century Aluminum's Revenues have experienced significant growth over recent years.
• Century Aluminum has encountered an average annual decline of 1.4% in its top line over the last 3 years (compared to a 5.5% increase for the S&P 500)
• Its revenues have increased by 11.4% from $2.1 Billion to $2.4 Billion in the past 12 months (relative to a 5.5% growth for the S&P 500)
• Furthermore, its quarterly revenues rose by 29.5% to $634 Million in the most recent quarter from $490 Million a year prior (compared to a 4.8% improvement for the S&P 500)
How Profitable Is Century Aluminum?
Century Aluminum's profit margins are significantly lower than most companies in the Trefis coverage universe.
• Century Aluminum's Operating Income over the last four quarters was $166 Million, reflecting a poor Operating Margin of 7.0%
• Century Aluminum's Operating Cash Flow (OCF) during this timeframe was $63 Million, indicating a very poor OCF Margin of 2.6% (compared to 14.9% for S&P 500)
• Throughout the last four-quarter period, Century Aluminum's Net Income amounted to $120 Million – signifying a poor Net Income Margin of 5.1% (in contrast to 11.6% for S&P 500)
Does Century Aluminum Appear Financially Stable?
Century Aluminum's balance sheet appears fragile.
• Century Aluminum's Debt stood at $483 Million at the end of the most recent quarter, while its market capitalization is $2.1 Billion (as of 7/21/2025). This results in a moderate Debt-to-Equity Ratio of 23.3% (compared to 19.4% for S&P 500). [Note: A low Debt-to-Equity Ratio is preferred]
• Cash (including cash equivalents) constitutes $45 Million of the $2.0 Billion in Total Assets for Century Aluminum. This provides a poor Cash-to-Assets Ratio of 2.3%
How Resilient Is CENX Stock In A Downturn?
CENX stock has performed worse than the benchmark S&P 500 index during several recent downturns. While investors hope for a smooth landing by the U.S. economy, what potential fallout could occur if another recession strikes? Our dashboard How Low Can Stocks Go During A Market Crash illustrates how key stocks performed during and after the last six market crashes.
• CENX stock decreased 82.1% from a high of $29.49 on March 4, 2022, to $5.28 on September 30, 2022, compared to a peak-to-trough drop of 25.4% for the S&P 500
• The stock is still yet to recover to its pre-Crisis high
• The highest price the stock has attained since then is 23.94 on December 3, 2024, and it currently trades around $22
• CENX stock fell 62.1% from a high of $8.02 on January 7, 2020, to $3.04 on April 3, 2020, versus a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully bounced back to its pre-Crisis peak by July 31, 2020
• CENX stock dropped 98.7% from a high of $79.99 on May 20, 2008, to $1.06 on March 9, 2009, compared to a peak-to-trough decline of 56.8% for the S&P 500
• The stock is still not recovered to its pre-Crisis high
Bringing It All Together: Implications For CENX Stock
To summarize, Century Aluminum's performance across the highlighted parameters is as follows:
• Growth: Very Strong
• Profitability: Very Weak
• Financial Stability: Weak
• Downturn Resilience: Very Weak
• Overall: Weak
Therefore, despite its low valuation, this results in the stock appearing risky, reinforcing our conclusion that CENX is presently a poor stock to purchase.
Although CENX stock seems volatile, investing in a single stock can be precarious. Conversely, the Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, boasts a history of consistently outperforming the S&P 500 over the last 4-year duration. What accounts for this? As a collective, HQ Portfolio stocks provided superior returns with lower risk compared to the benchmark index; a smoother journey, as evidenced in HQ Portfolio performance metrics.