President Trump wants to kick-start nuclear plant construction in the U.S. It might not be as easy as it seems.
Centrus Energy (LEU -7.93%) stock tumbled 8.1% through 11:45 a.m. ET Tuesday after The Wall Street Journal warned investors that President Trump’s plan to kick-start a nuclear power renaissance in America “won’t be easy.”
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What does Centrus do?
Centrus is today probably best known as one of a handful of nuclear stocks aiming to restart uranium enrichment for use as fuel in nuclear power plants in the U.S. The company already sells enriched uranium to power plants in the U.S., of course, but primarily in the capacity of a broker, buying uranium from foreign suppliers and reselling it in the U.S.
Both parts of the business, therefore, depend on growing demand for nuclear power — from a growing number of nuclear power plants operating in the U.S. According to the Journal, though, “Most current efforts [to grow nuclear power supply] are aimed at extending the operating licenses of existing reactors or trying to restart a handful of recently closed reactors.” That’s more likely to maintain existing levels of uranium demand than grow it.
And as for sparking a “nuclear renaissance,” the Journal points out that this has been predicted multiple times in the past, but “didn’t pan out.”
Is Centrus stock a sell?
Will this time be different? Perhaps. But with new nuclear plants still costing $30 billion and up to get approved and built, something big needs to change for Centrus to justify its stock valuation, which is currently 55 times next year’s expected earnings.
Despite all the hype, and despite (or because of) its stock price quadrupling over the past year, Centrus remains a speculative investment. Caveat investor.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
