We came across a bullish thesis on Perma-Fix Environmental Services, Inc. (PESI) on Substack by Idea Hive. In this article, we will summarize the bulls’ thesis on PESI. Perma-Fix Environmental Services, Inc. (PESI)’s share was trading at $13.72 as of Nov 14th.
A biohazard waste disposal team safely transferring contaminated water for treatment.
PESI, a provider of nuclear and hazardous waste treatment services, presents a compelling investment opportunity driven by its potential for significant revenue and profitability inflection in the coming years. The investment thesis hinges on PESI’s expected role in treating large volumes of radioactive waste from the decommissioned Hanford site, where it has secured or is likely to secure several major government contracts. These contracts, covering treatment of nuclear waste by-products and grouting of supplemental low-activity waste (LAW), could be transformative for the company. Despite the substantial visibility and long-term nature of these contracts, PESI currently trades at a valuation that reflects little value for these future, recurring revenue streams, which the market has yet to fully price in.
PESI’s third-quarter update provided key insights into these opportunities, particularly the Hanford-related contracts. The company expects to begin treating off-gas effluent, a by-product from nuclear waste vitrification, starting in late 2025, with an estimated 8,000 cubic meters of waste treated annually. PESI also outlined plans to treat approximately half of the 3.5 million gallons of supplemental LAW annually, with treatment likely starting in mid-2026, although the timeline could shift slightly depending on delays in the Department of Energy’s (DOE) pumping system. While these timelines remain largely unchanged, any potential delays in grouting are not expected to materially alter the long-term opportunity, which could generate significant revenue over the coming decades.
The potential revenue from these two Hanford contracts is substantial, with PESI poised to generate up to $230 million annually starting in 2027. The off-gas effluent treatment contract could yield around $80 million, while the supplemental LAW treatment could bring in up to $150 million. With high gross margins expected on these contracts, PESI could generate over $100 million in annual EBITDA, making the company’s current enterprise value of $210 million appear exceedingly low. Additionally, these contracts are likely to extend well beyond their initial term, potentially offering revenue well into the 2050s.
Beyond the Hanford opportunity, PESI is pursuing other growth avenues, such as a recently won $3 billion, 10-year West Valley award. While details remain scarce, PESI is expected to generate over $20 million annually from this contract. The company is also expanding into PFAS (per- and polyfluoroalkyl substances) treatment, a growing market, though the near-term revenue from this segment is expected to be modest.
Despite a challenging third quarter, PESI’s long-term outlook remains strong, driven by its significant growth opportunities. The company is actively addressing operational delays and stands to benefit from favorable regulatory shifts, with potential increased support from the U.S. government under the new administration. PESI is well-positioned to capitalize on large-scale, long-term contracts, particularly with the Hanford site, where it is progressing toward treating substantial volumes of nuclear waste and by-products. This development is expected to trigger a major inflection in the company’s operational performance.
Additionally, PESI is gaining exposure to other promising growth opportunities, such as the recent West Valley award and the PFAS treatment initiative. Although the stock has risen nearly 40% since the initial investment thesis was presented, the setup still appears compelling. With conservative assumptions, including a 5x 2027E EBITDA multiple, PESI’s stock could be worth over $32 per share, representing a 130%+ upside from current levels. As the company begins fulfilling its contracts in the second half of 2025, a re-rating of the stock toward this target is expected. Furthermore, a potential catalyst could be an official contract or decision announcement regarding the supplemental LAW treatment opportunity in the coming quarters, which could further drive the stock’s valuation higher.
Perma-Fix Environmental Services, Inc. (PESI) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 7 hedge fund portfolios held PESI at the end of the second quarter which was 6 in the previous quarter. While we acknowledge the risk and potential of PESI 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 PESI 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.