We came across a bullish thesis on Centrus Energy Corp. (LEU) on WallStreetBets subreddit page by devolution_king. In this article, we will summarize the bulls’ thesis on LEU. LEU Technologies, Inc. share was trading at $54.85 as of Sept 30th. LEU’s trailing and forward P/E were 9.69 and 19.30 respectively according to Yahoo Finance.
Miners at work in a mine, searching for Uranium and Vanadium.
Centrus Energy Corp (LEU) is the only American company operating in the nuclear power sector and it is expected to benefit from the AI growth that we have been seeing recently. The Mag7-Military-Industrial complex sees AI as being central to the US political and economic hegemony, AI growth has highlighted the bottlenecks that are present in the supply chain. So we can say that as AI grows the need for massive energy resources will be astronomical thus the world has turned towards nuclear power as a long-term solution for these energy needs. Securing reliable and scalable power sources has been paramount in today’s times which can be seen as companies such as Microsoft bid for the Three Mile Island nuclear site.
With the limited number of available nuclear sites and a lot of demand from tech giants, the nuclear energy sector is expected to be revalued upward. Thus going forward we will see an acceleration in nuclear investment and development, as companies want to secure the energy required to support future AI expansion. Most of the supply chain is controlled by Russia and it is expected that the U.S. will step in and act immediately to address this dependency as it is seen as critical for national security given that the U.S. is involved in a proxy war with Russia. These tailwinds initiated by the government and AI expansion will benefit LEU as it is a well-established player in uranium enrichment. The company is expected to receive substantial federal funding in the future to expand domestic enrichment facilities.
Additionally, major utilities and companies, particularly the Mag7, are anticipated to place large orders to secure future supplies of enriched uranium, driven by the expected growth in U.S. nuclear power sites which will significantly increase its order backlog and a series of positive developments as nuclear energy gains momentum. Overall, LEU is well-positioned to benefit from an upcoming wave of bullish news and investments in the nuclear sector.
Thus, Centrus Energy Corp (LEU) seems like a compelling investment opportunity in the nuclear sector trading at a mere 2.2x enterprise value/sales with reported revenues of $189 million last quarter, LEU’s valuation starkly contrasts with uranium miners of ones producing revenue, which averaged around 97x, with the lowest at 10x and notable player CCJ at 11x. Even compared to utility companies with nuclear exposure, which average 5x, LEU remains undervalued.
Centrus Energy Corp. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 9 hedge fund portfolios held LEU at the end of the second quarter which was 9 in the previous quarter. While we acknowledge the risk and potential of LEU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LEU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.