In this article, I compared two nuclear power stocks – SMR and LEU to see which is better. The energy crisis in Europe triggered by Russia’s invasion of Ukraine is causing many ESG-focused investors to rethink their investments in energy stocks. Traditionally, fossil fuels and nuclear energy were irrelevant for those with environmental, social and governance concerns. However, nuclear energy now seems attractive to some due to its zero-carbon nature.
NuScale Power Corporation (New York Stock Exchange: SMR) and Centrus Energy Corp (NYSE MKT: LEU) attack the issue of nuclear energy in two different ways. NuScale builds small modular nuclear reactors, while Centrus focuses on high-dosage low-enriched uranium (HALEAU). After further analysis, it looks like SMR stock might be a better bet. Let’s see why.
NuScale Power (SMR)
For one, NuScale Power is trading roughly at the bottom of its all-time range. It went public at around $10 per share via a SPAC merger in December 2020, and it has since erased nearly all of the gains it enjoyed in 2022. On the other hand, NuScale is unprofitable with very little revenue for the moment. A deeper dive suggests that a bullish view might seem appropriate – with the caveat that this is a high risk name.
Despite trading on the ground floor of where it went public via its SPAC merger, NuScale’s price-to-sales (P/S) multiple is outrageous, at around 54 times. The company is not yet profitable, having recorded just 2.9 million in revenue for 2021. However, its revenue has exploded in the past 12 months to $10 million, suggesting powerful growth potential in the short term. term.
In 2022, the Nuclear Regulatory Commission certified NuScale’s new reactor design, a massive win for the company as the commission has not certified any designs in years. The company’s reactors differ from other nuclear reactors because they are much smaller than the massive site-specific nuclear power plants used by utilities for decades.
NuScale’s design is also the first design ever approved for an advanced nuclear reactor in the United States. Additionally, the company struck a deal last year with a South Korean industrial company to forge materials for its small modular reactors.
Finally, NuScale has a positive book value per share, at $2.42/share, which is more than can be said for Centrus. Additionally, NuScale has no debt despite its lack of revenue. In fact, he had $318.6 million in cash and cash equivalents last quarter and only $84.8 million in total liabilities.
What is the target price for SMR stock?
NuScale Power has a consensus Hold rating based on zero buys, one Holds and zero sells assigned over the past three months. At $13, the average price target for NuScale Power stock implies upside potential of 23.93%.
Centrus Energy (UFE)
Centrus Energy is much more established, having a listed history dating back to 1998. The stock is already up 11% for 2023 and has gained 29% in the past six months. Its high debt suggests a neutral view might be appropriate.
Centrus offers a different way to play in the uranium market. Last month, the company signed a contract with the Department of Energy to produce HALEU, which is uranium that has been enriched to a higher concentration than the uranium used to power the current fleet of water reactors. light. HALEU should supply the new generation reactors.
One concern is Centrus’ negative price/book value per share (-$6.92/share), indicating balance sheet insolvency as its liabilities outweigh its assets. While this doesn’t necessarily mean the business is a bad investment, it does make it extremely risky. On its balance sheet, Centrus had $131.7 million in cash and cash equivalents, $618.2 million in total assets and $718.5 million in total liabilities as of the last quarter.
However, Centrus’ P/S ratio of 2.1 and P/E ratio of 4.7 look attractive compared to the recent surge in nuclear power stocks. Although it’s been around for decades, the company still made ‘only’ $256.6 million in revenue over the past 12 months, despite turning a profit, generating $147.1 million in revenue. net income over the past 12 months.
What is the target price for LEU shares?
Centrus Energy has a Moderate Buy consensus rating based on two buy, zero hold and zero sell ratings assigned over the past three months. At $60.50, the average Centrus Energy stock price target implies 53.9% upside potential.
Conclusion: Bullish on SMR, Neutral on LEU
Both companies are speculative, so Centrus could have as bright a future as NuScale, or NuScale could fail while Centrus soars. For now, however, Centrus’ debt is a major concern. Ultimately, investors interested in nuclear power stocks may want to weigh the good and the bad for themselves and decide which one is right for them.
Disclosure
