Centrus Energy's High Valuation Masks Critical Execution Risks Amid Uranium Rally

What happened

A Zacks Investment Research article compares Centrus Energy to peers as uranium prices rebound, testing its HALEU advantage and $3.9 billion backlog. However, DeepValue analysis reveals that much of this backlog is contingent on financing and building new Piketon capacity, with Q3 2025 showing negative LEU gross margins due to higher costs and lower SWU prices. Centrus remains heavily reliant on Russian supplier TENEX amid tightening sanctions, while volatile earnings and free cash flow complicate its financial stability. The stock trades at approximately 42 times TTM earnings and over three times its DCF intrinsic value of ~$64.71, implying overly optimistic assumptions about execution and policy support. As investors weigh uranium stock bets, Centrus's elevated valuation and unresolved risks overshadow its strategic positioning.

Implication

The market's optimism discounts near-perfect execution of Centrus's expansion plans, ignoring substantial uncertainties in DOE funding and backlog conversion. Persistent negative LEU margins and reliance on Russian supply amid sanctions could lead to further financial strain and contract disruptions. Large dilutive convertible debt adds to refinancing and equity dilution risks, exacerbating volatility in earnings and cash flow. A significant share price correction towards the DCF reference of ~$64.71 is likely necessary for the stock to offer a reasonable margin of safety. Until clear evidence of backlog firming, margin improvement, and supply diversification emerges, exposure to LEU should be limited despite broader sector tailwinds.

Thesis delta

The new article does not alter the core thesis that Centrus is overvalued with high execution and policy risks, as it primarily focuses on comparative analysis in a rebounding market. It reinforces the need for investors to critically assess Centrus's advantages against peers, but no fundamental shift is warranted based on this publication. The DeepValue report's STRONG SELL stance remains valid, emphasizing caution amid investor enthusiasm.