1 Brilliant Energy Stock to Buy Now and Hold for the Long Term

As technology companies move forward with data center plans and geopolitical tensions rise, demand for reliable energy continues to grow. According to the Bank of America Institute, U.S. electricity demand is set to soar at a rate five times faster over the next decade than in the last one.

One energy source regaining favor is nuclear energy. That's because it is a cleaner, reliable power source that data center operators and industrial operators can depend on. The United States has committed to quadrupling its nuclear energy capacity by 2050, creating a surge in uranium demand and a significant need for new nuclear facilities in the next decade.

For investors looking to jump on this trend, one brilliant energy stock to hold long-term is Cameco (NYSE: CCJ). Here's why.

Cameco's North American uranium assets provide a strong competitive advantage

As geopolitical tensions escalate, countries are seeking energy security. When it comes to nuclear energy, Russia has traditionally been a major supplier of uranium and related nuclear fuels. However, following Russia's invasion of Ukraine, the United States passed the "Prohibiting Russian Uranium Imports Act," forcing utility companies to seek alternative providers of these key fuels. Right now, companies have waivers to purchase uranium from Russia if no viable alternative sources exist, but these waivers are set to expire on Jan. 1, 2028.

This is where Cameco has a notable advantage. The North American uranium company has key assets in high-grade uranium mines, including McArthur River and Cigar Lake, in northern Saskatchewan, Canada. It also operates the Key Lake Mill, the world's largest uranium mill, where it processes high-grade ore from the McArthur River mine. On top of that, it holds a 40% stake in joint venture Inkai, a low-cost, in-situ recovery operation in Kazakhstan.

Not only do Cameco's high-grade mines enable it to produce more uranium with a smaller footprint, but they are also strategically located in North America, positioning it as a key supplier of nuclear inputs to help diversify away from Russian sources. In addition, the company avoids volatility associated with regulatory and political uncertainty in other major uranium-producing countries such as Kazakhstan, Niger, and Uzbekistan.

Cameco's investment in Westinghouse Electric provides it with vertical integration

Another benefit of owning Cameco is its stake in Westinghouse Electric, which provides nuclear technology, design, and engineering services for nuclear plants worldwide. Cameco owns a 49% stake in the company, with Brookfield Renewable Partners owning the remaining 51%.

Westinghouse builds AP1000 large-scale nuclear reactors, which are fully licensed and operational, and its technology is found in roughly half of the world's operating nuclear plants. By owning a stake in Westinghouse, Cameco shares in the company's success, especially as countries push to increase their nuclear energy capacity. Last year, Cameco's share of Westinghouse revenue was $3.5 billion while its adjusted EBITDA surged 61% to $780 million.

Image source: Getty Images.

Last year, the U.S. government partnered with Westinghouse, Cameco, and Brookfield to build over $80 billion in new reactors to support growing power demands from data centers and other operators. As part of this, Westinghouse is aiming to have 10 new AP1000 reactors under construction in the U.S. starting in 2030.

Westinghouse benefits from the nuclear build-out and from servicing those reactors when they come online. These nuclear power plants require specialized maintenance and can provide a revenue stream for the next 60 to 80 years. Not only that, but these new reactors will need plenty of fuel, and Cameco is in a prime position to provide it.

An energy stock to buy the dip on

Cameco stock has experienced volatility recently, and it's down 21% from its recent peak amid weakness in the broader market and volatility driven by the current conflict in Iran. Investors should be aware that the stock is vulnerable to large swings, especially given its high valuation of 72 times this year's forward earnings.

With that said, analysts project strong growth for the uranium miner over the next several years, with GAAP earnings per share (EPS) expected to grow from $0.99 last year to $2.68 by 2028, representing a compound annual growth rate of 39% over the next three years.

Given Cameco's strong market position and the growing demand for uranium over the coming decades, I think now is an excellent time for long-term investors to buy the dip on this energy stock.

Bank of America is an advertising partner of Motley Fool Money. Courtney Carlsen has positions in Cameco. The Motley Fool has positions in and recommends Cameco. The Motley Fool recommends Brookfield Renewable. The Motley Fool has a disclosure policy.