A Look at Babcock & Wilcox Enterprises's Valuation Following Its Landmark $1.5 Billion AI Data Center Deal

Babcock & Wilcox Enterprises (NYSE:BW) just landed a $1.5 billion deal to deliver power infrastructure for a large AI data center. This signals a significant step into the growing tech-driven energy market.

See our latest analysis for Babcock & Wilcox Enterprises.

The share price of Babcock & Wilcox Enterprises has rocketed, posting an eye-catching 111.8% return over the past month and an impressive 295.4% gain so far this year. This renewed momentum follows the company’s entry into the lucrative AI data center market and news of a $1.5 billion contract. Long-term holders have seen a 170.4% total return over one year.

If you're interested in other tech-forward infrastructure players making waves, take the next step and explore See the full list for free.

With shares already surging on contract news and strong growth optimism, investors now face the key question: does Babcock & Wilcox remain undervalued, or has the market already priced in its future AI success?

Price-to-Sales of 1x: Is it justified?

With Babcock & Wilcox trading at a price-to-sales (P/S) ratio of 1x, the stock appears attractively valued relative to both industry peers and the broader market. This figure stands out against its last close price of $6.84, signaling a notable discount versus competitors.

The price-to-sales ratio measures how much investors are willing to pay for each dollar of the company’s revenue. In capital goods and infrastructure, where earnings may be volatile or negative, P/S offers a useful perspective on investor expectations for growth and demand.

Here, the company’s 1x ratio is not just favorable; it is significantly below the US Electrical industry average of 2.2x and the peer group average of 4.1x. Market participants may be underpricing BW’s potential, given its entry into AI infrastructure and recent contract win. In addition, the estimated fair price-to-sales ratio sits higher at 1.6x, suggesting further room for market recognition if growth materializes.

Explore the SWS fair ratio for Babcock & Wilcox Enterprises

Result: Price-to-Sales of 1x (UNDERVALUED)

However, ongoing net losses and modest annual revenue growth of just 4.6% could temper near-term investor enthusiasm if profitability remains elusive.

Find out about the key risks to this Babcock & Wilcox Enterprises narrative.

Another View: DCF Tells a Different Story

Looking at valuation from a different angle, our SWS DCF model suggests Babcock & Wilcox is currently trading above its estimated fair value of $5.68. This view implies the recent surge might have pushed the price beyond what fundamentals support, at least for now. Could market optimism be running ahead of the company’s real prospects?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Babcock & Wilcox Enterprises for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 854 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Babcock & Wilcox Enterprises Narrative

If you have your own perspective or want to dig deeper into the numbers, you can craft a custom view of Babcock & Wilcox Enterprises in just a few minutes, and Do it your way.

A great starting point for your Babcock & Wilcox Enterprises research is our analysis highlighting 1 key reward and 4 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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