Better Nuclear Energy Stock: Cameco (CCJ) vs. Centrus Energy (LEU)

Uranium comes in several flavors. There's plain old-fashioned yellowcake powdered uranium concentrate. There's low-enriched uranium, whose natural uranium-235 content of 0.7% has been increased to 3% to 5% concentration, so that it can be used in a nuclear power plant. There's even high-assay low-enriched uranium (HALEU) with a U235 content increased past 5% -- as high as almost 20% -- for use in the new generation of high-efficiency small modular reactors.

Then there's highly enriched uranium, with U235 content of 90%-plus. (That's the stuff we don't want Iran to get.) But for now, let's focus on yellowcake, LEU, and HALEU as the fuels driving the nuclear power revolution.

Image source: Getty Images.

Lots of kinds of uranium: Two important companies

Reviewing the nuclear power industry in search of interesting stocks recently, I struck upon an interesting fact: Out of the nearly one dozen "nuclear" stocks I cover, only two are actually generating positive GAAP profits and positive free cash flow: Cameco (NYSE: CCJ) and Centrus Energy (NYSE: LEU).

Cameco is primarily a uranium mining company that produces and refines uranium for use as nuclear fuel. Cameco also owns a 49% stake in Global Laser Enrichment (GLE), which is developing a U.S.-based enrichment industry to produce both LEU and HALEU domestically.

Centrus Energy, in contrast, does not mine uranium -- it buys it, either as concentrate, which it enriches into LEU (which, not coincidentally, is also Centrus's stock ticker) or HALEU, or imported, pre-enriched, from abroad.

To an extent, the companies can be seen as complementary: Cameco provides uranium, and Centrus provides enrichment. By virtue of Cameco's investment in GLE, however, the two companies are also rivals.

And I think investors should look at these two atomic stocks that way as well.

Cameco versus Centrus

Viewed side by side numerically, Cameco and Centrus appear almost mirror images.

Data source: Finviz.com.

By the numbers, Centrus has the edge on P/E -- less than half the cost of Cameco stock. Conversely, Cameco boasts stronger free cash flow and a better growth rate. Granted, growth can be difficult to predict, and you should always take such projections with a few grains of salt, especially over longer periods, and especially when uncertain whether analysts are forecasting GAAP or non-GAAP growth.

Near-term, however, where prospects should be clearer, analysts polled by S&P Global Market Intelligence expect Cameco to nearly double its 2025 GAAP earnings to $1.89 per share by 2027. Centrus's earnings are expected to grow only 9% over the same period, to $5.30 per share. (The analysts also expect Centrus's free cash flow to turn negative.)

The upshot for investors

Neither Cameco nor Centrus offers an obvious bargain price. Investors are simply too excited about the nuclear revolution to underprice nuclear stocks. But apples-to-apples, Cameco boasts stronger free cash flow and faster growth.

Factor in secure access to all the uranium it wants to mine, and the potential to build an enrichment business that can rival Centrus's, and Cameco stock looks to me like the better buy.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cameco. The Motley Fool has a disclosure policy.