Should You Buy Centrus Energy While It’s Below $270?

Centrus Energy is uniquely positioned as the only producer of HALEU for both commercial and national security applications that is licensed by the Nuclear Regulatory Commission (NRC). It’s also the only company capable of producing HALEU outside of Russia, which is vital as HALEU will power the next generation of nuclear reactors.

Centrus is also the only U.S. company with a proven enrichment technology capable of meeting both commercial and national security needs. Stifel analysts have noted Centrus is “uniquely positioned” to play a significant role in rebuilding the nuclear enrichment supply chain.

Right now, Centrus relies on outside sources to deliver LEU. It has two commercial agreements to sell LEU, one of which is with TEXEX, a Russian entity, which it will need to diversify away from in the coming years. The company currently has a waiver from the Department of Energy that allows it to import LEU for all of its committed deliveries to U.S. customers in 2026 and 2027. However, the Russian LEU import ban is expected to be fully phased in by 2028 — creating an urgent need to replace about 25% of enriched uranium currently imported from Russia.

Image source: Getty Images.

Centrus aims to produce LEU and HALEU in-house using its advanced centrifuge technology. To do this, it will need to expand the uranium enrichment capacity at its Piketon, Ohio, plant. This hinges on Department of Energy funding, private investment, and long-term customer commitments. If Centrus succeeds, it could transition from reseller to a producer of key nuclear fuels.

Centrus is well positioned to become a key player in the nuclear fuel supply chain. The stock isn’t cheap by any means, priced at 48.6 times this year’s projected earnings per share (EPS). However, with the recent decline in the stock price, it’s well off its high valuation of 88 times this year’s EPS. Its growth trajectory is heavily dependent on becoming a primary domestic supplier of nuclear fuel. The timing of the growth is uncertain, as it’s tied to the build-out of its Piketon plant, which will require significant upfront investment.

Centrus’ valuation remains on the high end, but reflects investor optimism about its potential role in the future of nuclear energy. The stock is pricey, which makes it vulnerable to large price swings, so it’s not ideal for conservative investors with a short time frame.

That said, I believe nuclear is the future, and Centrus Energy could be an important player, which is why I think this dip is a good opportunity for investors to build a small position in the nuclear company.

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Bank of America is an advertising partner of Motley Fool Money. Courtney Carlsen has positions in Centrus Energy. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Should You Buy Centrus Energy While It’s Below $270? was originally published by The Motley Fool