Centrus Advances Enrichment Plans Amid Persistent Overvaluation Risks

What happened

Centrus Energy announced it has begun domestic centrifuge manufacturing at its Piketon, Ohio facility to support commercial Low-Enriched Uranium enrichment activities, targeting new capacity by 2029. This move aligns with its strategy to scale domestic production and convert a $3.9 billion backlog, much of which is contingent on this build-out. However, the DeepValue report highlights severe execution risks, including past earnings volatility, Q3 2025 LEU gross losses, and heavy reliance on Russian supplier TENEX amid sanctions. Despite this progress, the stock trades at ~42x TTM EPS and ~50x EV/EBITDA, with a DCF reference value of ~$64.71 versus a ~$272-273 share price, embedding optimistic assumptions of flawless success. The announcement does little to mitigate the fundamental overvaluation or the policy and financial uncertainties that underpin the STRONG SELL rating.

Implication

Centrus is taking tangible actions to expand domestic enrichment capacity, which could eventually help firm up its contingent backlog and reduce reliance on Russian supplies. However, the 2029 timeline for new capacity is distant, and near-term challenges like negative LEU margins and TENEX dependency persist, threatening cash flows. The stock's premium multiples reflect excessive optimism about future success, ignoring the historical volatility in earnings and free cash flow. Investors should closely monitor DOE funding awards and task order conversions, as these are critical for stabilizing revenues and margins. Without a significant price correction or demonstrable improvements in contract economics and execution, the risk/reward remains unfavorable for fundamentally oriented investors.

Thesis delta

The thesis remains unchanged; the new article confirms execution of planned capacity expansion but does not alter the overvaluation or key risks like policy dependence and Russian supply exposure. It reinforces the long, capital-intensive timeline and the need for concrete progress on margins and backlog conversion before reconsidering the STRONG SELL stance. No shift is warranted unless future developments, such as firm DOE orders or sustained positive gross margins, materially reduce execution uncertainty.