Delayed DOE Awards Will Hinder Nuclear Fuel Potential

Key Takeaways

• High expectations for rapid growth rest on favorable policies and shifting uranium supply but face execution, regulatory, and funding risks that could pressure margins and sales.
  
• Overestimated utility contract momentum and uncertainty from emerging competing technologies threaten long-term demand and revenue visibility.
  
• Centrus is positioned for sustained growth and margin expansion, leveraging unique market leadership, strong contractual backlog, and strategic investments amid favorable nuclear industry trends.

Catalysts

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

• Investors appear to be pricing in significant, multi-year revenue and earnings growth premised on a rapidly expanding addressable market for both LEU and HALEU due to a highly supportive policy environment (federal and state backing of nuclear, AI-driven electricity demand, and reshoring of uranium supply). If these expectations do not materialize as quickly or as strongly as assumed-due to industry or regulatory delays-future revenue and EBITDA could fall short of implied growth rates.
  
• The current valuation assumes Centrus will rapidly scale capacity to meet rising demand just as Russian supply exits the Western market; however, timelines for building new cascades are long (first cascade takes 42 months, subsequent cascades take months each) and highly dependent on the allocation and timing of DOE funding. Any holdup in these government awards or in private capital inflows could lead to prolonged periods of underutilized cash, lower revenue, and diminished operating leverage, thus pressuring future margins and earnings.
  
• Investors may be overestimating the pace and stickiness of government and utility contracting for enrichment services, supported by expectations of premium pricing and long-term deals as Western utilities diversify from Russian supply. Should utilities delay or limit their contracting activity-or revert to shorter-term or contingent contracts-backlog growth and forward revenue visibility could stall, ultimately impacting projected sales growth and backlog conversion.
  
• There is an expectation embedded in the stock that the accelerating global decarbonization trend will drive a nuclear "renaissance, but advances in renewables, storage, and distributed energy could cap or even reduce medium
• and long-term nuclear deployment. If non-nuclear alternatives scale faster than utility planning assumes, Centrus' long-term volume opportunity (and thus revenue growth) could be materially lower than anticipated.
  
• The market seems to be capitalizing Centrus as a clear winner and technology leader in HALEU and domestic uranium enrichment, but execution risk remains (manufacturing/manpower ramp, contract negotiations, and regulatory/permitting). Delays or cost overruns in commercializing next-gen enrichment, or higher-than-expected compliance/operational costs, could drive down net margins and erode earnings, especially given current high expectations for margin expansion.

Centrus Energy Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Centrus Energy's revenue will grow by 13.6% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 24.0% today to 11.0% in 3 years time.
• Analysts expect earnings to reach $70.3 million (and earnings per share of $3.89) by about August 2028, down from $104.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $112.7 million in earnings, and the most bearish expecting $18.8 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 87.7x on those 2028 earnings, up from 36.3x today. This future PE is greater than the current PE for the US Oil and Gas industry at 13.2x.
• 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 6.92%, as per the Simply Wall St company report.

Centrus Energy Future Earnings Per Share Growth

Risks

• Robust long-term demand for nuclear fuel is being driven by bipartisan government policies, private sector investments, and the global energy transition, positioning Centrus Energy to benefit from secular tailwinds that could fuel sustained revenue growth.
  
• Centrus' unique first-mover advantage as the only publicly traded, proven American enricher-particularly in HALEU production-could lead to multi-year national security and commercial contracts, supporting long-term predictability and potentially higher margins and earnings.
  
• The company's substantial $3.6 billion backlog through 2040, including $1.8 billion in definitive LEU agreements and clear ongoing progress in securing additional commitments, offers significant visibility on future revenues beyond near-term fluctuations.
  
• Operational leverage from scaling up enrichment and cost efficiencies evidenced by rising gross margins (35% vs. 19% YoY) suggest the potential for ongoing margin and earnings expansion as production ramps to meet market needs.
  
• Strengthened by a robust cash position ($833M as of Q2 2025), active investment in supply chain and technology, and increasing access to both government funding (i.e., the $3.4B DOE allocation) and private capital, Centrus is well equipped to fund growth initiatives, which can support long-term revenue, profitability, and competitive positioning.

Valuation

• The analysts have a consensus price target of $229.3 for Centrus Energy based on their expectations of its future earnings growth, profit margins and other risk factors. 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 analyst's consensus, you'd need to believe that by 2028, revenues will be $640.9 million, earnings will come to $70.3 million, and it would be trading on a PE ratio of 87.7x, assuming you use a discount rate of 6.9%.
• Given the current share price of $208.67, the analyst price target of $229.3 is 9.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.