Aluminum Star | After an 18.8% 5-Day Rally, Is CENX Still a Buy?

In the past five days, $Century Aluminum(CENX)$ 's share price has risen by 18.84%.

Major stock indexes ended a largely positive holiday week quietly. After traders got the day off for Christmas, the tech-heavy $NASDAQ(.IXIC)$ closed down 0.1% and the blue-chip $Dow Jones(.DJI)$ fell fractionally. The benchmark $S&P 500(.SPX)$ set a new intraday high before finishing fractionally lower. The three indexes, which snapped five-session winning streaks Friday, nevertheless all rose by more than 1% for the week.

The best-performing concepts is Aluminum Concept. Considering the different perceptions of the stock, this time TigerPicks chose $Century Aluminum(CENX)$ to have a fundamental highlight to help users understand it better.

In the past five days, $Century Aluminum(CENX)$ 's share price has risen by 18.84%.

$Century Aluminum(CENX)$

Century Aluminum Company (CENX), headquartered in Chicago, owns and operates primary aluminum smelters in the U.S. and Iceland, and is the majority owner of the Jamalco alumina refinery in Jamaica.

Recent Performance Review

Previously, CENX's stock faced pressure due to high borrowing costs, inflation, and a slow recovery in Chinese demand.

However, following the Federal Reserve's initiation of an interest rate cut cycle in 2024 (cumulative 100 basis points) and an improving macro environment, the company's stock has staged a strong rebound of 429.5% from its lows, significantly outperforming the S&P 500's 55.8% gain over the same period.

Core Rationale for the Upgrade

1. Lower Financing Costs & Optimized Debt Structure: Leveraging the Fed's rate cuts, the company refinanced $400 million in secured notes, extending their maturity from 2026 to 2032 and lowering the interest rate from 7.5% to 6.875%. This significantly reduces interest expenses and enhances financial flexibility.

2. Capacity Expansion Plan Execution: The company has invested $50 million to restart idled capacity at its Mt. Holly smelter in South Carolina, aiming to add 50,000 tons of annual production. A stable six-year power supply agreement is in place, with full capacity targeted for early summer 2026.

3. Supportive U.S. Trade Policy: The Trump administration's Section 232 tariffs provide protection for the domestic aluminum industry, creating a favorable policy environment for the company.

4. Fundamental Support for Aluminum Prices: Global supply remains tight due to China's deliberate production curbs (reducing its 2025-26 base metal output growth target from 5% to 1.5%) and capacity cuts by major producers like Alcoa. Concurrently, emerging demand from sectors like data centers provides long-term support, keeping aluminum prices elevated.

Financial Status

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• The 1% quarter-over-quarter decrease in net sales to $628.1 million in the second quarter ended June 30, 2025, due to lower third-party alumina sales, is still not fully offset by favorable regional premium pricing, volumes, and mix.

• Adjusted net income, attributable to Century shareholders, was $30.4 million for the second quarter of 2025, a decrease of 17% from the prior quarter, as rising metal and regional premium prices have not yet fully offset derivative losses.

• Adjusted EBITDA attributable to Century shareholders was $74.3 million in the second quarter of 2025, a decrease of 4.7% from the previous quarter. This decrease was due to higher raw material costs, operating expenses, and unfavourable currency translation effects.

Valuation Analysis

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Adjusted EBITDA of $338.4 million for the last 12 months is calculated as follows: $74.3 million for Q2 2025, plus $78 million for Q1 2025, plus $82.4 million for Q4 2024, plus $103.7 million for Q3 2024.

1.32x is a good value in line with the "lower the better" mentality and thus represents a healthier financial position and lower financial risk. In comparison, analysts and investors often consider a net debt to adjusted EBITDA ratio below 2.0x or 2.5x to be an acceptable ratio for a stock in the capital-intensive and commodity-price-volatile aluminum industry.

As the cash flow statement shows, CENX has now entered a phase where the company is generating cash, causing its net debt to decline.

Instead, adjusted EBITDA for the last 12 months is on an upward trend due to higher realized prices. The company's guidance for the third quarter of 2025 calls for adjusted EBITDA between $115 million and $125 million, representing an increase of 61.5% quarter-over-quarter and 15.7% year-over-year.

Therefore, we believe the net debt to adjusted EBITDA ratio will improve.

Conclusion

Century Aluminum's profit outlook has improved significantly, driven by multiple positive factors including an enhanced financial structure, capacity expansion, favorable policies, and supportive industry fundamentals. Despite ongoing cost pressures, the current valuation does not fully reflect its growth potential. Therefore, the rating is upgraded from "Hold" to "Buy".

Stock Price Forecast:

Here are the target price forecasts for the next 12 months from analysts.

Based on several Wall Street analysts offering 12-month price targets for Century Aluminum (CENX) in recent months (primarily the last 3 months of 2025), the average price target is approximately $39-41, with a high forecast of $46.00 (from Wells Fargo, updated December 23, 2025) and a low forecast around $34.00. The average price target represents a potential upside of about 5-15% from the recent closing price around $40.18 (as of December 26, 2025). Consensus ratings lean toward "Buy" or "Strong Buy" from the covering analysts.

Resource:

https://seekingalpha.com/article/4831361-century-aluminum-sees-rising-profits-with-expanded-smelting-capacity-and-higher-prices-rating-upgrade

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