Why Centrus Energy Stock Popped Today
Key Points
President Trump says Project Vault will include a strategic reserve of uranium.
Centrus Energy is America's biggest seller of enriched uranium.
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Centrus Energy (NYSE: LEU) stock leapt 6.3% through noon ET Tuesday as further details filtered out regarding President Trump's "Project Vault."
As you may recall, initial reports on Project Vault described it as a $11.7 billion effort to amass a strategic reserve of rare-earth metals, inciting investors to scoop up shares of rare-earth mining companies such as USA Rare Earth (NASDAQ: USAR), which popped yesterday before dropping -- and now is going on another tear of its own!
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Well, it now turns out that rare-earths are only the beginning. The President also wants to buy uranium.
Image source: Getty Images.
Project Vault
As CNBC clarifies this morning, "the Trump administration's Project Vault stockpile can include any of the more than 50 minerals listed as critical by the Interior Department," including "rare earths, lithium, uranium and copper."
Or as the President put it: "We're not just doing certain minerals and rare earths. We're doing everything."
The bit about uranium is what's getting investors excited about Centrus Energy today. As the leading candidate to bring uranium enrichment back to the United States (and as a company that already does brisk business buying and reselling uranium that was enriched elsewhere), Centrus would appear admirably placed to benefit from $11 billion-plus in new government spending to stockpile uranium and other "critical" metals.
Is Centrus Energy stock a buy?
And here's the thing: Even before Project Vault was announced, Centrus Energy stock was looking pretty buyable. Priced at a seemingly rich 43 times trailing earnings, Centrus generates substantially more free cash flow ($146 million) than it reports as net income ($114 million).
The resulting 33x price-to-free cash flow ratio is still pricey, but in a world of overpriced uranium stocks, Centrus Energy is arguably the least overvalued way to invest in nuclear energy today.
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Rich Smith 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.
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