Centrus Energy Benefits from DOE's Nuclear Push, But Valuation Still Overextended

What happened

A recent Zacks article highlights the DOE's $2.7 billion initiative to boost U.S. uranium enrichment capacity, framing it as a catalyst for nuclear-themed ETFs like URA. Centrus Energy is directly implicated, having secured a $900 million DOE task order in January 2026 to expand its Piketon, Ohio facility, as noted in the DeepValue report. However, Centrus trades around $310 with rich multiples—48x P/E and 58x EV/EBITDA—pricing in aggressive growth assumptions despite 2024 revenue of $442 million and volatile quarterly earnings. The DeepValue report emphasizes substantial risks: a capital-intensive build-out with dilution from a $1 billion ATM equity program, contingent backlog conversion uncertainties, and new capacity not expected until 2029. Market sentiment paints Centrus as a policy-backed 'national champion,' but this overlooks the execution hurdles and financial strain embedded in current valuations.

Implication

The DOE's $2.7 billion enrichment funding provides a supportive backdrop for Centrus's expansion, yet the stock already discounts a near-perfect outcome, leaving minimal margin for error. Investors must closely watch the formalization of the $900 million task order and any equity issuance from the ATM program, as dilution could significantly erode per-share value. Competition from other DOE-awarded firms like General Matter and Orano may intensify, potentially squeezing future margins despite near-term policy advantages. Near-term financial performance will remain lumpy due to contract timing, with key milestones like backlog conversion and capex discipline critical over the next 6-12 months. Overall, while the nuclear narrative gains traction, Centrus's risk/reward remains skewed to the downside at current prices, aligning with the DeepValue 'POTENTIAL SELL' rating.

Thesis delta

The new article does not materially shift the investment thesis for Centrus; it echoes the policy-driven optimism already factored into the stock price, which the DeepValue report criticizes as excessive. However, it highlights growing retail interest through ETFs, potentially increasing volatility without improving fundamentals, reinforcing the need for skepticism towards market hype. No change to the bearish view is warranted, as execution risks, dilution, and high valuation persist unchanged.