Intrinsic value of Century Aluminum Company - CENX

Previous Close

$5.97

  Intrinsic Value

$8.01

stock screener

  Rating & Target

buy

+34%

Previous close

$5.97

 
Intrinsic value

$8.01

 
Up/down potential

+34%

 
Rating

buy

We calculate the intrinsic value of CENX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  12.20
  11.48
  10.83
  10.25
  9.72
  9.25
  8.83
  8.44
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
  5.52
  5.47
  5.42
  5.38
  5.34
Revenue, $m
  2,124
  2,368
  2,624
  2,893
  3,175
  3,468
  3,774
  4,093
  4,425
  4,769
  5,127
  5,500
  5,886
  6,288
  6,706
  7,141
  7,594
  8,064
  8,555
  9,066
  9,598
  10,154
  10,734
  11,339
  11,971
  12,631
  13,322
  14,043
  14,799
  15,589
Variable operating expenses, $m
  1,983
  2,199
  2,427
  2,666
  2,915
  3,176
  3,448
  3,731
  4,025
  4,331
  4,553
  4,883
  5,227
  5,584
  5,955
  6,341
  6,742
  7,161
  7,596
  8,050
  8,523
  9,016
  9,531
  10,068
  10,629
  11,216
  11,828
  12,469
  13,140
  13,841
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,983
  2,199
  2,427
  2,666
  2,915
  3,176
  3,448
  3,731
  4,025
  4,331
  4,553
  4,883
  5,227
  5,584
  5,955
  6,341
  6,742
  7,161
  7,596
  8,050
  8,523
  9,016
  9,531
  10,068
  10,629
  11,216
  11,828
  12,469
  13,140
  13,841
Operating income, $m
  141
  169
  197
  228
  259
  292
  326
  362
  399
  438
  575
  616
  660
  705
  752
  800
  851
  904
  959
  1,016
  1,076
  1,138
  1,203
  1,271
  1,342
  1,416
  1,493
  1,574
  1,659
  1,747
EBITDA, $m
  339
  378
  419
  461
  506
  553
  602
  653
  706
  761
  818
  877
  939
  1,003
  1,070
  1,139
  1,211
  1,286
  1,364
  1,446
  1,531
  1,619
  1,712
  1,808
  1,909
  2,015
  2,125
  2,240
  2,360
  2,486
Interest expense (income), $m
  20
  23
  31
  40
  49
  58
  68
  78
  88
  99
  111
  122
  135
  148
  161
  175
  189
  204
  220
  236
  253
  270
  288
  308
  328
  348
  370
  393
  417
  441
  467
Earnings before tax, $m
  118
  137
  158
  179
  201
  224
  249
  274
  300
  327
  452
  482
  512
  544
  577
  611
  647
  684
  723
  764
  806
  850
  895
  943
  993
  1,046
  1,100
  1,158
  1,217
  1,280
Tax expense, $m
  32
  37
  43
  48
  54
  61
  67
  74
  81
  88
  122
  130
  138
  147
  156
  165
  175
  185
  195
  206
  218
  229
  242
  255
  268
  282
  297
  313
  329
  346
Net income, $m
  86
  100
  115
  131
  147
  164
  182
  200
  219
  239
  330
  352
  374
  397
  421
  446
  472
  500
  528
  557
  588
  620
  654
  689
  725
  763
  803
  845
  889
  934

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,725
  1,923
  2,132
  2,350
  2,579
  2,817
  3,066
  3,325
  3,594
  3,874
  4,165
  4,468
  4,782
  5,108
  5,448
  5,801
  6,169
  6,551
  6,949
  7,365
  7,797
  8,249
  8,719
  9,211
  9,724
  10,261
  10,822
  11,408
  12,022
  12,663
Adjusted assets (=assets-cash), $m
  1,725
  1,923
  2,132
  2,350
  2,579
  2,817
  3,066
  3,325
  3,594
  3,874
  4,165
  4,468
  4,782
  5,108
  5,448
  5,801
  6,169
  6,551
  6,949
  7,365
  7,797
  8,249
  8,719
  9,211
  9,724
  10,261
  10,822
  11,408
  12,022
  12,663
Revenue / Adjusted assets
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
  1.231
Average production assets, $m
  1,087
  1,212
  1,344
  1,481
  1,625
  1,776
  1,932
  2,096
  2,265
  2,442
  2,625
  2,816
  3,014
  3,220
  3,434
  3,656
  3,888
  4,129
  4,380
  4,642
  4,914
  5,199
  5,496
  5,805
  6,129
  6,467
  6,821
  7,190
  7,577
  7,981
Working capital, $m
  308
  343
  381
  420
  460
  503
  547
  593
  642
  692
  743
  797
  854
  912
  972
  1,035
  1,101
  1,169
  1,240
  1,315
  1,392
  1,472
  1,556
  1,644
  1,736
  1,832
  1,932
  2,036
  2,146
  2,260
Total debt, $m
  374
  474
  579
  689
  804
  924
  1,050
  1,180
  1,316
  1,457
  1,604
  1,756
  1,914
  2,079
  2,250
  2,428
  2,613
  2,806
  3,007
  3,216
  3,434
  3,662
  3,899
  4,147
  4,406
  4,676
  4,959
  5,254
  5,563
  5,887
Total liabilities, $m
  870
  969
  1,074
  1,185
  1,300
  1,420
  1,545
  1,676
  1,812
  1,953
  2,099
  2,252
  2,410
  2,575
  2,746
  2,924
  3,109
  3,302
  3,503
  3,712
  3,930
  4,157
  4,395
  4,642
  4,901
  5,172
  5,454
  5,750
  6,059
  6,382
Total equity, $m
  856
  954
  1,057
  1,166
  1,279
  1,397
  1,521
  1,649
  1,783
  1,922
  2,066
  2,216
  2,372
  2,534
  2,702
  2,877
  3,060
  3,249
  3,447
  3,653
  3,867
  4,091
  4,325
  4,569
  4,823
  5,089
  5,368
  5,658
  5,963
  6,281
Total liabilities and equity, $m
  1,726
  1,923
  2,131
  2,351
  2,579
  2,817
  3,066
  3,325
  3,595
  3,875
  4,165
  4,468
  4,782
  5,109
  5,448
  5,801
  6,169
  6,551
  6,950
  7,365
  7,797
  8,248
  8,720
  9,211
  9,724
  10,261
  10,822
  11,408
  12,022
  12,663
Debt-to-equity ratio
  0.440
  0.500
  0.550
  0.590
  0.630
  0.660
  0.690
  0.720
  0.740
  0.760
  0.780
  0.790
  0.810
  0.820
  0.830
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.890
  0.900
  0.910
  0.910
  0.920
  0.920
  0.930
  0.930
  0.940
Adjusted equity ratio
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  86
  100
  115
  131
  147
  164
  182
  200
  219
  239
  330
  352
  374
  397
  421
  446
  472
  500
  528
  557
  588
  620
  654
  689
  725
  763
  803
  845
  889
  934
Depreciation, amort., depletion, $m
  197
  209
  221
  234
  247
  261
  276
  291
  306
  323
  243
  261
  279
  298
  318
  339
  360
  382
  406
  430
  455
  481
  509
  538
  568
  599
  632
  666
  702
  739
Funds from operations, $m
  283
  309
  336
  364
  394
  425
  457
  491
  526
  562
  573
  612
  653
  695
  739
  785
  832
  882
  933
  987
  1,043
  1,102
  1,163
  1,226
  1,293
  1,362
  1,435
  1,511
  1,590
  1,673
Change in working capital, $m
  33
  35
  37
  39
  41
  43
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  68
  71
  74
  77
  81
  84
  88
  92
  96
  100
  105
  109
  115
Cash from operations, $m
  250
  274
  299
  325
  353
  382
  413
  444
  477
  512
  521
  558
  597
  637
  679
  722
  767
  814
  862
  913
  966
  1,021
  1,078
  1,138
  1,201
  1,266
  1,335
  1,406
  1,481
  1,559
Maintenance CAPEX, $m
  -90
  -101
  -112
  -124
  -137
  -150
  -164
  -179
  -194
  -210
  -226
  -243
  -261
  -279
  -298
  -318
  -339
  -360
  -382
  -406
  -430
  -455
  -481
  -509
  -538
  -568
  -599
  -632
  -666
  -702
New CAPEX, $m
  -118
  -125
  -131
  -138
  -144
  -150
  -157
  -163
  -170
  -176
  -183
  -191
  -198
  -206
  -214
  -223
  -232
  -241
  -251
  -262
  -273
  -284
  -297
  -310
  -324
  -338
  -353
  -370
  -387
  -405
Cash from investing activities, $m
  -208
  -226
  -243
  -262
  -281
  -300
  -321
  -342
  -364
  -386
  -409
  -434
  -459
  -485
  -512
  -541
  -571
  -601
  -633
  -668
  -703
  -739
  -778
  -819
  -862
  -906
  -952
  -1,002
  -1,053
  -1,107
Free cash flow, $m
  42
  48
  55
  63
  72
  82
  92
  102
  114
  126
  112
  125
  138
  152
  166
  181
  197
  213
  229
  246
  263
  282
  300
  320
  340
  361
  382
  405
  428
  453
Issuance/(repayment) of debt, $m
  94
  100
  105
  110
  115
  120
  125
  130
  136
  141
  147
  152
  158
  165
  171
  178
  185
  193
  201
  209
  218
  227
  237
  248
  259
  270
  283
  296
  309
  323
Issuance/(repurchase) of shares, $m
  8
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  102
  100
  105
  110
  115
  120
  125
  130
  136
  141
  147
  152
  158
  165
  171
  178
  185
  193
  201
  209
  218
  227
  237
  248
  259
  270
  283
  296
  309
  323
Total cash flow (excl. dividends), $m
  144
  148
  160
  174
  187
  202
  217
  233
  249
  267
  258
  277
  297
  317
  338
  359
  382
  405
  430
  455
  482
  509
  538
  568
  599
  631
  665
  700
  737
  776
Retained Cash Flow (-), $m
  -94
  -98
  -103
  -108
  -113
  -118
  -123
  -128
  -134
  -139
  -144
  -150
  -156
  -162
  -168
  -175
  -182
  -190
  -198
  -206
  -215
  -224
  -234
  -244
  -255
  -266
  -278
  -291
  -304
  -318
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  51
  50
  57
  65
  74
  83
  94
  104
  116
  128
  114
  127
  141
  155
  169
  184
  200
  216
  232
  249
  267
  285
  304
  324
  344
  365
  387
  410
  433
  458
Discount rate, %
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
  47
  43
  46
  47
  49
  50
  50
  49
  47
  45
  34
  32
  30
  27
  24
  20
  17
  14
  12
  9
  7
  5
  4
  3
  2
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6

Century Aluminum Company (Century) is a holding company, which is a producer of primary aluminum and operates aluminum reduction facilities, or smelters, in the United States and Iceland. The Company operates through primary aluminum segment. The Company's primary aluminum facilities produce standard grade primary aluminum products. As of December 31, 2016, its annual primary aluminum production capacity was approximately 1,012,000 tons per year (tpy). The Company's principal subsidiaries are Century Kentucky, Inc. (CAKY), Nordural ehf (Nordural), Century Aluminum Sebree LLC (Century Sebree), Century Aluminum of South Carolina (CASC) and Century Aluminum of West Virginia, Inc. (Century of West Virginia). Its CAKY operates a primary aluminum reduction facility in Hawesville, Kentucky (Hawesville). Nordural Grundartangi ehf, a subsidiary of Nordural, operates a primary aluminum reduction facility in Grundartangi, Iceland (Grundartangi).

FINANCIAL RATIOS  of  Century Aluminum Company (CENX)

Valuation Ratios
P/E Ratio -2.1
Price to Sales 0.4
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 13.7
Price to Free Cash Flow 32.6
Growth Rates
Sales Growth Rate -32.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate -14.1%
Financial Strength
Quick Ratio 17
Current Ratio 0.1
LT Debt to Equity 32.8%
Total Debt to Equity 33.8%
Interest Coverage -12
Management Effectiveness
Return On Assets -14.1%
Ret/ On Assets - 3 Yr. Avg. -2.8%
Return On Total Capital -22.1%
Ret/ On T. Cap. - 3 Yr. Avg. -5.7%
Return On Equity -28.5%
Return On Equity - 3 Yr. Avg. -7.4%
Asset Turnover 0.8
Profitability Ratios
Gross Margin -0.8%
Gross Margin - 3 Yr. Avg. 3.9%
EBITDA Margin -11.1%
EBITDA Margin - 3 Yr. Avg. 1.3%
Operating Margin -17.7%
Oper. Margin - 3 Yr. Avg. -4.2%
Pre-Tax Margin -19%
Pre-Tax Margin - 3 Yr. Avg. -4.6%
Net Profit Margin -19.1%
Net Profit Margin - 3 Yr. Avg. -5.2%
Effective Tax Rate -1.2%
Eff/ Tax Rate - 3 Yr. Avg. -3.5%
Payout Ratio 0%

CENX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CENX stock intrinsic value calculation we used $1893 million for the last fiscal year's total revenue generated by Century Aluminum Company. The default revenue input number comes from 0001 income statement of Century Aluminum Company. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CENX stock valuation model: a) initial revenue growth rate of 12.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.1%, whose default value for CENX is calculated based on our internal credit rating of Century Aluminum Company, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Century Aluminum Company.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CENX stock the variable cost ratio is equal to 93.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CENX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 8.4% for Century Aluminum Company.

Corporate tax rate of 27% is the nominal tax rate for Century Aluminum Company. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CENX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CENX are equal to 51.2%.

Life of production assets of 10.8 years is the average useful life of capital assets used in Century Aluminum Company operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CENX is equal to 14.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $762.2 million for Century Aluminum Company - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 88.104 million for Century Aluminum Company is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Century Aluminum Company at the current share price and the inputted number of shares is $0.5 billion.

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