Centrus Energy Stock: 3 Reasons to Buy Now Like There’s No Tomorrow

Nuclear fuel play Centrus Energy just triggered buy alarms across trading desks.

H1 Enrichment Capacity Expansion

Centrus keeps adding centrifuges while competitors struggle with regulatory hurdles—because nothing says growth like spinning uranium at supersonic speeds.

H1 Government Contract Pipeline

Federal energy contracts keep stacking up faster than Wall Street can print 'speculative buy' ratings. The Department of Energy's checkbook remains wide open for domestic nuclear fuel development.

H1 Global Uranium Squeeze

With uranium prices hitting decade highs and geopolitical tensions reshaping supply chains, Centrus sits pretty as one of America's few licensed HALEU producers. Because when the world goes nuclear, you want the company holding the fuel keys.

While traditional energy stocks wobble on ESG concerns, Centrus delivers the ultimate paradox: carbon-free power through atomic fission. Just don't tell the fossil fuel bankers still betting on oil—they might need to actually read a physics textbook.

Image source: Getty Images.

Right place, right time

And what lies behind Centrus's amazing rise -- I mean, in addition to the well-timed support from the President?

Well, there's Russia's war in Ukraine, for one thing. The United States imports 99% of the uranium used in American nuclear power plants, and 27% of that comes from Russia. "Thanks" to the war, however, the U.S. government has passed laws banning imports of Russian-sourced uranium, effective in 2028, and that means Centrus' role as a buyer and reseller of imported uranium is only going to get more important over time.

Centrus is further cementing its centrality by developing the capacity to enrich uranium domestically, such that the U.S. won't need to import so much uranium from abroad -- even from friendly suppliers such as France's Orano or from the British-Dutch-German company Urenco.

Alongside Urenco, which operates an enrichment facility in New Mexico, Centrus is the only other company licensed by the Nuclear Regulatory Commission to produce low enriched uranium (LEU) in the U.S. (Centrus also possesses a license to produce high-assay enriched uranium, or HALEU, for next-generation nuclear reactors.) 

The second part of the puzzle is the artificial intelligence revolution, which is driving up electricity demand to levels where only the rapid building of new nuclear power plants can provide the amounts of power needed. This is why everyone -- fromtoto-- has been inking electricity supply agreements with nuclear power companies lately.

It also speaks clearly to a trend of rising demand for enriched uranium fuel -- which is what Centrus aims to supply.

And yet, this is a story that's been developing for more than a year now -- ever since(CEG 1.59%) announced last year that it would need to reopen Three Mile Island in order to provide the kind of power levels that Microsoft needs. By this point, it's hardly a secret that Centrus is sitting in the proverbial catbird's seat, and likely to profit handsomely as this new nuclear story plays out.

This is the reason Centrus stock is up 450% over the past year. The question now is: Is it too late to buy into Centrus stock? I fear it may be.

Is Centrus Energy stock a buy?

Don't get me wrong -- I'm totally on board with the idea that Centrus will perform well as a business as old reactors ramp their power output, and new reactors -- including new types of small reactors from NuScale, Nano Nuclear, and others -- come online. I'll even acknowledge that Centrus is doing just fine already today.

Centrus recorded a profit of $105 million over the past 12 months -- and these are high-quality profits, resulting in the generation of $107 million in positive free cash flow. The company's balance sheet is also flush, with $400 million more cash than debt in the bank. The problem is, at its present market capitalization of more than $5 billion, Centrus stock is selling for 47 times free cash FLOW and 48 times earnings.

Those valuations might be defensible if Centrus were growing rapidly today. However, most analysts polled by S&P Global Market Intelligence forecast relatively flat profit growth for the next several years, with earnings only really taking off in 2030 and after, once new reactor types start going online.

While it's possible the stock's valuation will prove justifiable in those years, it's also possible something will happen over the next half-decade to upset this nuclear Apple cart, and make Centrus stock look less attractive than investors currently hope for.

Personally, I'm going to need a much bigger margin of safety before buying in, and so for me, Centrus stock remains a sell.