Global Decarbonization And Electrification Will Expand Advanced Nuclear Reactors

Key Takeaways

• Exclusive capability in HALEU enrichment positions Centrus for outsized market share, pricing power, and superior margin expansion as Russian supply diminishes.
  
• Surging nuclear investment and electrification trends underpin long-term demand, backlog growth, and recurring revenue, reinforced by supportive policy and industry reshoring.
  
• Heavy reliance on government funding, concentrated contracts, operational risks, evolving energy trends, and regulatory scrutiny all threaten Centrus Energy's long-term growth and earnings stability.

Catalysts

Supplies nuclear fuel components for the nuclear power industry in the United States, Belgium, Japan, the Netherlands, and internationally.

• Analyst consensus recognizes Centrus' contract wins as significant, but few appreciate that Centrus' exclusive position-being the only proven, commercially ready American HALEU enricher, amidst the accelerating exit of Russian supply-could drive a step-change in market share, allowing Centrus to capture premium pricing and deliver supernormal revenue and margin expansion in the coming years.
  
• While consensus focuses on Centrus' $2.2 billion in definitive customer LEU commitments, it understates the magnitude of potential upside: as both public (DOE) and private (large U.S. corporates like Amazon and Meta) financing flood into new nuclear deployments, the opportunity for Centrus' sales backlog and recurring revenue could compound far beyond current projections, supporting outsized earnings growth and cash generation.
  
• Centrus' rapid progress in domestic centrifuge manufacturing and supply chain readiness, combined with management's active efforts to streamline build cycle times for new enrichment capacity, sets the stage for a multi-year period of accelerating capacity expansion, driving operating leverage and structurally higher long-term profit margins.
  
• Global decarbonization mandates and the U.S. push for secure, low-carbon, baseload power-coupled with the sharp rise in electrification from AI, tech and manufacturing-suggest a prolonged, durable surge in enriched uranium demand, solidifying Centrus' long-term revenue visibility and pricing leverage as utilities and industry lock in domestic supply.
  
• With the Western uranium enrichment sector constrained by decades of underinvestment and looming geopolitical reshoring, Centrus is uniquely positioned to benefit from future government intervention (such as price floors or expanded incentive programs), further bolstering sector margins, de-risking the business model, and paving the way for structural earnings re-rating.

Centrus Energy Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Centrus Energy compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Centrus Energy's revenue will grow by 25.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 24.0% today to 11.2% in 3 years time.
• The bullish analysts expect earnings to reach $97.1 million (and earnings per share of $5.79) by about August 2028, down from $104.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 85.7x on those 2028 earnings, up from 40.8x today. This future PE is greater than the current PE for the US Oil and Gas industry at 13.3x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.86%, as per the Simply Wall St company report.

Centrus Energy Future Earnings Per Share Growth

Risks

• Centrus Energy faces heavy dependence on long-term government policy and funding decisions, particularly the Department of Energy's allocation of $3.4 billion for enrichment capacity; delays, changes, or reductions in government support could materially reduce their addressable market and directly impact revenue growth and profitability.
  
• The company's business is highly exposed to customer concentration risk, as its revenues largely depend on a limited number of utility contracts and government agreements; the loss, renegotiation, or delay of any major contract could create sudden drops in annual revenue and undermine earnings predictability.
  
• Centrus is subject to significant execution and timeline risks in scaling its HALEU and LEU production; any delays, technical setbacks, or cost overruns in manufacturing or deployment could erode net margins and force the company to raise additional capital, potentially diluting shareholder value and tightening net income.
  
• The accelerating global transition towards renewable energy and technological improvements in energy storage threaten to reduce long-term demand for nuclear energy and uranium enrichment services, which would shrink Centrus' potential future revenues and capacity utilization rates.
  
• The nuclear sector faces mounting regulatory, ESG, and public scrutiny around radioactive waste and proliferation risks, which may delay new project approvals or make nuclear less attractive in energy portfolios, putting downward pressure on medium-term industry contracting activity and future revenue streams for Centrus.

Valuation

• The assumed bullish price target for Centrus Energy is $310.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Centrus Energy's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $310.0, and the most bearish reporting a price target of just $108.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $866.4 million, earnings will come to $97.1 million, and it would be trading on a PE ratio of 85.7x, assuming you use a discount rate of 6.9%.
  
• Given the current share price of $234.94, the bullish analyst price target of $310.0 is 24.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.