Why Century Aluminum Stock Soared Higher Today

Friday is turning out to be a great day to own shares of Century Aluminum (NASDAQ: CENX) -- one day after the metals producer reported earning nearly twice Wall Street's forecast for Q3.

Heading into yesterday's report, analysts expected Century to earn $0.30 per share (adjusted) in Q3, on $628.1 million in sales. In fact, Century reported a profit of $0.56 per share, and sales of $632.2 million. And now, Century stock is up a solid 12% through 11 a.m. ET.

Century Aluminum's Q3 earnings

Not all the news is good. Century grew sales 17.3% year over year, but earnings per share as calculated according to generally accepted accounting principles (GAAP) -- in contrast to the "adjusted" number noted -- were only $0.15 per share. That's a decline of more than 67% from the $0.46 per share Century earned one year ago.

Little wonder, therefore, that when reporting its results, Century chose not to focus on the sequential change between Q2 and Q3. By that metric, sales grew about 0.6% sequentially, even as tons of aluminum shipped declined 7.6%, and earnings nearly doubled.

Is Century Aluminum stock a buy?

The way I look at it, though, Century is a $32 stock with only about $0.87 per share in net profit earned over the past year -- thus a commodity metal producer selling for a price-to-earnings ratio of more than 36x. That seems a bit expensive to me. Then again, if Century hits the earnings targets Wall Street has set for it -- $1.56 per share this year, then $3.10 per share next year, the stock could be cheaper than it looks.

I probably wouldn't buy it at today's price, but I certainly understand if other investors see value in Century Aluminum stock.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.