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We feel now is a pretty good time to analyse Century Aluminum Company's (NASDAQ:CENX) business as it appears the company may be on the cusp of a considerable accomplishment. 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. Many investors are wondering about the rate at which Century Aluminum will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
See our latest analysis for Century Aluminum
According to the 2 industry analysts covering Century Aluminum, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$488m in 2022. The company is therefore projected to breakeven around a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 77% is expected, 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.
Given this is a high-level overview, we won’t go into details of Century Aluminum's upcoming projects, but, 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. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
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, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
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There are too many aspects of Century Aluminum to cover in one brief article, but the key fundamentals for the company can all be found in one place – Century Aluminum's company page on Simply Wall St. We've also compiled a list of pertinent aspects you should further examine: