Should You Buy NuScale Power Stock While It's Below Its All-Time High?

Key Points

• NuScale’s small modular reactors could disrupt the nuclear power industry.

• But it hasn’t actually built or delivered any of those reactors yet.

• Its big projects in Romania and the U.S. could drive its stock a lot higher.

• 10 stocks we like better than NuScale Power ›

NuScale Power's (NYSE: SMR) stock closed at a record high of $51.67 on July 25. That marked a near five-bagger gain from its opening price of $10.70 after it went public by merging with a special purpose acquisition company (SPAC) on May 3, 2022.

The speculative nuclear power stock has pulled back nearly 30% since then, but is it still worth buying? Let's review its business model, growth rates, and valuations to decide.

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A picture from inside a nuclear reactor. Image source: Getty Images.

How does NuScale plan to disrupt the nuclear energy industry?

NuScale develops small modular reactors (SMRs), which can be installed in containers just 9 feet wide and 65 feet high. They're prefabricated, delivered, and go through final assembly on site to reduce the time and costs for building a standard nuclear plant. That flexibility also allows them to be deployed in areas unsuited for larger nuclear reactors.

NuScale is the only company that has received Standard Design Approvals from the U.S. Nuclear Regulatory Commission (NRC) for its modular reactors. The NRC approved its 50-megawatt (MW) design in January 2023 and its 77-MW design this May.

Its 77-megawatt designs take up only 1% of the space of a conventional nuclear reactor but generate roughly the same amount of power. That huge leap forward in efficiency could make SMRs a crucial way to support the rapid expansion of the power-hungry cloud, artificial intelligence (AI), and data center markets.

NuScale previously planned to build a 462-MW plant powered by six of its 77-MW reactors in Idaho, but soaring costs and lack of customer commitments forced it to scrap that ambitious project in 2023. It finally returned to the U.S. market in early September with an agreement with the Tennessee Valley Authority to deploy up to six gigawatts (6,000 megawatts) of its SMR capacity across the authority's seven-state service region. That will represent the largest SMR deployment in U.S. history, but those plants aren't expected to come on line until 2032.

For now, NuScale generates most of its revenue as a subcontractor for Fluor's planned construction of a new 462-MW plant -- which will also use six of its 77-MW modular reactors -- for Romania's RoPower. That project is still in the front-end engineering and design (FEED) phase, but it's expected to receive a final investment decision (FID) in 2026.

Can NuScale grow into its sky-high valuations?

NuScale still hasn't built, sold, or delivered any of its modules, but it already has a market cap of $5.23 billion. That's 109 times the $48 million in revenue that analysts expect NuScale to generate from its FEED studies, feasibility studies, consulting services, grants, and cost-sharing agreements with the Department of Energy (DOE) in 2025. On the bottom line, they expect it to narrow its annual net losses from $137 million to $79 million.

From 2025 to 2027, analysts expect NuScale's annual revenue to surge more than sevenfold to $350 million as it narrows its net loss to $52 million. We should take that rosy outlook with a grain of salt, but that growth could be driven by the expansion of business with more design, licensing, procurement, and early manufacturing revenue. That evolution will hinge on a favorable FID in Romania and the start-up of its TVA program in the United States.

To achieve that expansion, NuScale could need to raise a lot more cash. It has already more than tripled its number of outstanding shares since its public debut, and that dilution should persist as it covers its stock-based compensation and raises fresh cash through secondary offerings.

But if it successfully commercializes its SMRs and scales up its business, it might not seem that expensive at 15 times its projected sales for 2027. Its insiders also bought nearly eight times as many shares as they sold over the past 12 months -- and that warmer insider sentiment suggests it might achieve its ambitious goals.

NuScale isn't a reliable stock for conservative investors, but I think it's worth nibbling on as it trades below its all-time high. It could be easily cut in half during a market crash, but it could also generate huge multibagger gains if it successfully commercializes its modules and disrupts the nuclear reactor industry.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.