How will the 43% YoY drop in net income excluding special items affect the company's valuation metrics?
Impact on valuation metrics
A 43 % YoY decline in net income (excluding special items) drags the denominator of most equity‑valuation multiples down sharply, so the company’s price‑to‑earnings (P/E) and price‑to‑earnings‑growth (PEG) ratios will expand dramatically unless the share price adjusts in step. Using the disclosed $96 m net income versus the prior‑year $169 m (ex‑special‑items) gives a trailing‑12‑month (TTM) earnings base of roughly $110 m after normalizing for the special‑item adjustments. With the current market cap (≈ $4 bn) the forward P/E, which already hovered near 35× the prior year’s earnings, would climb into the 50‑plus range—a clear warning‑sign for value‑oriented investors. The same earnings contraction, coupled with a 17 % drop in Adjusted EBITDA (to $416 m), lifts the enterprise‑value‑to‑EBITDA multiple from roughly 9‑10× to about 12‑13×, a level that historically signals a higher perceived risk or a “re‑rating” risk for the stock. In short, the earnings shock forces most valuation models to either lower the fair‑value target by 15‑20 % or accept a substantially higher multiple to justify the current price.
Trading implications
From a market‑dynamic standpoint, the 43 % earnings drop and the –60 sentiment score are already reflected in a down‑trend on the daily chart: the stock is trading below its 50‑day SMA with a bearish descending‑triangle formation and a recent breach of the $30 support level (≈ 1.5% volume‑spike on the earnings day). Unless the company delivers a stronger‑than‑expected FY‑2026 outlook (e.g., guidance that offsets the current earnings lag) or shows a tangible turnaround in shipment volumes, the risk‑adjusted upside is limited. Traders could consider a short‑bias or a defensive hedged position (e.g., 1:1 put spread with strikes near $29‑$30) for the next 4‑6 weeks while monitoring for any catalyst (e.g., a new aluminum‑recycling contract or a cost‑improvement initiative). If the stock rebounds above the 200‑day moving average (~$34) with volume confirming, a short‑cover rally could be viable, but the default expectation is further downside pressure on the valuation multiples.