Given the disruptions to the global energy sector, many market participants have inquired about how to invest in nuclear energy stocks. Although a somewhat controversial industry because of certain high-profile incidents, the segment itself carries tremendous relevancy.
No other commodity features the energy density of nuclear fuel. For instance, one uranium fuel pellet has as much energy as 17,000 cubic feet of natural gas. It’s also the equivalent of 149 gallons of crude oil or one ton of coal. Therefore, the initiative to invest in nuclear energy centers on scientific realities.
Second, nuclear power facilities feature the highest capacity factor or measurement of reliability. According to government sources, nuclear features a capacity factor of 92.5%, meaning that nearly 93% of a given year, such power plants produce maximum power. In contrast, solar only has a capacity factor of 24.9%. Again, realities dictate the motivation to invest in nuclear energy.
To be fair, though, the segment does carry more risk than other energy industries. Nevertheless, if you believe in the forward relevancies of uranium, these may be the best stocks to buy to invest in nuclear energy.
One of the most prominent names for those who seek to invest in nuclear energy, Cameco (NYSE:CCJ) is the world’s largest publicly traded uranium company. Therefore, if you’re looking for a direct play with a massive footprint in nuclear power, CCJ is it.
Currently, the company features a market cap of $9 billion. On a year-to-date basis, CCJ gained 1.3%, which ordinarily isn’t great. However, with the benchmark indices struggling for sustained traction, the above-parity performance undergirds the relevance of the nuclear industry.
To be clear, Gurufocus.com rates Cameco’s business as significantly overvalued. On paper, the company features a forward price-earnings ratio of 26 times, which is well above the other energy sources industry median of 5.2 times.
Nevertheless, the critical point here (as with other prospects to invest in nuclear energy) is forward relevancy. With the conflict in eastern Europe straining hydrocarbon energy supplies, CCJ may not be that overvalued in reality.
BHP Group (BHP)
Although the motivation to invest in nuclear energy centers on the aforementioned scientific realities, the sector itself remains volatile. Therefore, it might make sense for conservative investors to consider diversified blue chips like BHP Group (NYSE:BHP). A metal, mining, and energy firm (which also includes a uranium mining project), BHP is not tied to one segment. Therefore, it offers a very sensible approach to nuclear power.
Presently, BHP features a market cap of nearly $123 billion. At the time of writing, BHP lost about 9% YTD. Obviously, that’s not a figure to shoot for. However, with so much red ink in the broader equities space, it’s not inconceivable to think that BHP can make a strong comeback next year. After all, it’s not down some horrendous amount.
Gurufocus.com labels BHP as modestly undervalued. Fundamentally, BHP represents an all-around solid idea, especially if you’re looking to invest in nuclear energy. Backed by a strong balance sheet, the company features excellent growth and profitability metrics.
Energy Fuels (UUUU)
Billed as the leading U.S. producer of uranium and vanadium, Energy Fuels (NYSEAMERICAN:UUUU) also specializes in rare earth element products. Currently, Energy Fuels carries a market cap of 1.46 billion CAD, or roughly the equivalent of $1.06 billion. At the time of writing, UUUU has dropped more than 21% in equity value since the beginning of the year.
Unfortunately, one of the harsh realities when seeking to invest in nuclear energy is that prospective stakeholders must be prepared to accept volatility. UUUU provides a clear example of this situation. To be clear, the company represents more of an aspirational market idea.
According to Gurufocus.com, UUUU rates as significantly overvalued. At the moment, it’s difficult to argue against this assessment. While Energy Fuels posted explosive growth in the second quarter of 2022, its net loss expanded to $18 million from nearly $11 million. However, it’s also important to note that the company features a very stout balance sheet. Therefore, it just might have the resources to make its aspirations come true.
NuScale Power (SMR)
If you’re looking to invest in nuclear energy and are willing to absorb some market risk in exchange for the potential for significant upside, NuScale Power (NYSE:SMR) brings plenty of excitement to the table. Consistently across several platforms, I’ve been pounding the table on SMR stock, and for good reason. NuScale effectively delivers decentralized modularity to the nuclear industry.
Specializing in small modular reactors or SMRs, NuScale’s facilities feature a smaller physical footprint than traditional counterparts. Therefore, SMRs can be integrated into previously inaccessible areas. Further, because of their smaller and safer profile, SMRs can be positioned closer to the source of demand. If you think about it, it’s like edge computing but with reliable power streams.
Undergirding NuScale is the fact that the company received the first certification from the Nuclear Regulatory Commission regarding an SMR design. True, the company represents a work in progress financially. But the fundamentals are very much worth checking out.
NexGen Energy (NXE)
Although many of the criticisms directed at the nuclear industry are unfair, it’s impossible to ignore all of them. Indeed, for the mainstream to invest in nuclear energy, some product/service evangelization may be necessary. Fortunately, companies like NexGen Energy (NYSE:NXE) bring a friendlier, approachable profile to the somewhat controversial sector.
Essentially, NexGen forwards the concept of environmentally and socially responsible uranium mining. According to its website, “NexGen’s projects are designed ensuring the highest levels of environmental performance incorporating ‘absolute minimalistic expression’, progressive real-time reclamation and advanced closure management design.”
Currently, NexGen features a market cap of 2.63 billion CAD, roughly equivalent to $1.91 billion. Since the start of the year, NXE shed over 17% of its market value. That’s not great but in terms of uranium stocks, it’s not terrible.
Financially, NexGen doesn’t feature the most robust profile so investors will be taking big risks. That said, it does enjoy a decently stable balance sheet, particularly an equity-to-asset ratio of 0.8 times, above the industry median of 0.57 times.
Denison Mines (DNN)
For those wanting to invest in nuclear energy primarily for the purposes of speculation, Denison Mines (NYSEAMERICAN:DNN) offers an enticing profile. Based in Canada, Denison specializes in uranium exploration, development, and production. As well, the company features a diversified business, including relevant commodities like coal and potash.
Presently, Denison Mines commands a market cap of just over $977 million. Since the beginning of the year, DNN shares lost 20.5% of equity value. While these types of stats usually keep conservative investors on the sidelines, they could be appealing for gamblers. For instance, DNN currently trades hands for around $1.20 a pop. That might be appealing for the meme-trade phenomenon or similar dynamics.
Per Gurufocus.com, DNN is significantly overvalued. This rating isn’t that surprising given its poor profitability track record. Nevertheless, Denison enjoys a very stable balance sheet. Unencumbered with debt, the company enjoys the resources to play the uranium game for the long haul.
Finally, for those seeking to invest in nuclear energy for the possibility of massive upside, Ur-Energy (NYSEAMERICAN:URG) may be worth consideration. At first glance, the company seems incredibly speculative. For starters, URG trades hands for about $1.18 at the time of writing. Therefore, it’s only a few ticks away from being a literal penny stock.
As well, Ur-Energy presently has a market cap of only $263 million. That might put it below small-cap territory and into the micro-cap realm. However, it’s also important to remember that the company brings fundamental value to the discussion. Primarily, its website claims that Ur-Energy is the lowest-cost producer of uranium in North America. As critical energy supplies become constrained due to geopolitical tensions, this attribute could become extremely significant.
Perhaps coming as no shocker, though, Gurufocus.com rates URG as significantly overvalued. Against longer-term frameworks, the company features poor growth and profitability metrics. Even the balance sheet is somewhat middling, meaning this is largely a speculative opportunity. Still, that might be appealing to those who want to roll the dice.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.