Why Centrus Energy Stock Is Soaring Today

Key Points

• Centrus Energy is a leader in uranium enrichment.

• The company announced a multibillion-dollar expansion of its facility to boost uranium enrichment operations.

• Shares of Centrus Enegy are trading at a premium to their historical valuation.

• 10 stocks we like better than Centrus Energy ›

Announcing plans to expand its plant at Piketon, Ohio, Centrus Energy (NYSEMKT: LEU) has its sights set on more robust uranium enrichment operations, according to its press release today.

Nuclear energy investors are certainly taking note and bidding the stock higher. As of 12:08 p.m. ET, shares of Centrus Energy are up 10.7%.

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A major investment is powering the bulls to click the buy button

Raising over $1.2 billion in two convertible note transactions over the past year and securing more than $2 billion in contingent purchase commitments from customers, Centrus Energy plans on expanding operations at its Ohio facility, where the company will increase low-enriched uranium (LEU) and high-assay low-enriched uranium (HALEU) production. Management didn't directly address the size of the expansion, stating that the size depends on funding decisions from the U.S. Department of Energy for LEU and HALEU.

Hardly a simple operation, uranium enrichment is not something many companies engage in -- yet Centrus Energy maintains leadership in the field.

Speaking to the company's merits, Mike DeWine, governor of Ohio, stated, "Uranium enrichment operations in Piketon have played a critical role in U.S. national defense since the earliest days of the Cold War, and Centrus' facility provides the only technology available today capable of building out domestic enrichment at an industrial scale."

Is Centrus Energy stock a buy based on today's news?

With advanced nuclear small modular reactors (SMRs) expected to proliferate in the coming years, the importance of uranium enrichment in supporting the rollout of SMRs is becoming increasingly obvious. In recognition of this, nuclear energy many are looking not just to SMR developers, but uranium enrichment companies like Centrus Energy as worthwhile investments.

While today's news is encouraging, with the stock's 361% climb year to date, shares now trade at a premium valuation: about 40.5 times operating cash flow. For context, Centrus Energy stock has a five-year average cash flow multiple of 6.6. The stock is compelling, but if you're looking for a bargain, you'll have to look elsewhere.

Should you invest $1,000 in Centrus Energy right now?

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Scott Levine 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.