It’s no secret that we’re on the edge of a global energy crisis. Electric utility prices are high – and rising – worldwide, while political winds are pushing to replace fossil fuels with cleaner wind or solar power. The price crunch is exacerbated by the underlying costs of those clean power technologies, in the form of materials and required backup generation capacity. And that has many governments and power utilities taking a second look at nuclear power.
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Say ‘nuclear power’ and far too may people will jump right to Chernobyl, or Three Mile Island, or Cold War Armageddon fears – but the facts paint a different picture. Nuclear powerplant technology has improved dramatically in safety since the 1970s, and the underlying costs – mainly construction of the facility – only have to be borne once. This makes nuclear plants a viable option for electric utilities, who are always on the lookout for clean, reliable, and safe energy sources.
In a visible sign of a more accepting attitude toward nuclear power, the Vogtle Electric Generating Plant in eastern Georgia successfully activated its Unit 3 reactors for a test run earlier this month. When brought fully into commission, it will be only the second new nuclear plant put in operation since 1996.
Given the realities of renewable energy, and the various pressures to reduce fossil fuel dependence, it’s likely that we’ll see more nuclear reactor projects come off the drawing boards – so now may be the right time to start checking out nuclear-related stocks.
With this in mind, we’ve pulled up the details on two such names that, according to TipRanks’ database, offer investors a chance to double their money, or better. Along with their substantial upside potential, these Buy-rated tickers won’t break the bank, as each trading for less than $5 per share.
enCore Energy Corporation (EU)
Nuclear power rests on uranium, which has to be dug out of the ground – so we’ll start in the mining industry. enCore Energy is a uranium miner, with a diversified portfolio of conventional and in-situ recovery (ISR) projects in various stages of pre-production. The projects, in the Rocky Mountain region and south Texas, are wholly owned and offer the promise of environmentally sound, domestic uranium production.
ISR is a mining technology designed to minimize economic damage. The mining company injects fluids into the underground ore strata to dissolve the target minerals, which can then be brought back to the surface. The technique can be used in new projects, or to exploit mines that are played out by conventional standards.
enCore is still a pre-revenue company, but reported over $28 million in assets, in Canadian currency, as of September 30, 2022. These assets included $17.3 million in cash. At current exchange rates, these reported assets are worth US$20.37 million and $12.58 million respectively.
Showing confidence in this mining firm is Cantor analyst Mike Kozak, who sees several reasons to back enCore.
While sentiment in the uranium sector has turned increasingly positive over the last two years, the market remains in a structural primary supply deficit, a dynamic that has persisted for over the past six years… Against this backdrop, enCore Energy and its portfolio of entirely U.S.-based uranium projects, stands to be a clear beneficiary,” Kozak opined.
“We expect a significant re-rating higher for the Company and the group as a whole upon the successful transition from development to production and positive free cash flow. With production from its Rosita ISR operation set to re-start in the next several months, enCore Energy will be among the first U.S.-based uranium miners to make this transition,” the analyst added.
Understanding the value of uranium, Kozat rates EU as a Buy, and his price target, at $5.25, implies a one-year appreciation of ~178%. (To watch Kozat’s track record, click here)
Only two of Wall Street’s analysts have weighed in on enCore, but they both agree that the stock is a Buy – making for a unanimously positive Moderate Buy consensus. The stock is selling for $1.88 and its average price target of $5.12 suggests an upside of 172% in the year head. (See EU stock forecast)
GSE Systems, Inc. (GVP)
Nuclear power plants don’t exist in a vacuum, and there is an entire service industry behind the scenes, providing support – simulation and training systems – to nuke plant operators. GSE Systems, the second stock we’re looking at, is one of these. The Maryland-based company provides engineering and workforce solutions to the clean energy sector, through a series of high-quality simulation products and hands-on work. GSE’s services allow plant workforces to fill their operational gaps and optimize their new technologies.
GSE last reported financial results in November, for 3Q22. The company reported a decline in revenue, of 7% year-over-year, to $11.9 million. At the bottom line, the company reported an operating loss of $9 million, or 42 cents per share. Those declines and losses covered some better news. GSE’s performance and engineering revenue for the quarter grew 9% y/y, and the software and support sales were up an impressive 147% from 3Q21, to $2 million. New orders for company services up 49% quarter-over-quarter, to $10.2 million.
Given its $0.85 share price, Sameer Joshi, a 5-star analyst with H.C. Wainwright, believes that now is the ideal time to get on board.
“Investors looking to benefit from the expected growth in the nuclear power industry currently do have access to publicly traded large-cap power companies like PG&E (PCG), Duke (DUK),and Constellation Energy (CEG) that own and operate nuclear power plants, and also to some mid-sized nuclear services companies like BWX Technologies (BWXT). But many of the companies that offer nuclear services are either private or divisions of larger companies. GSE is one of the few publicly traded micro- or small-cap growth companies active in the nuclear power industry, and offers investors an option to participate in a growth opportunity,” Joshi opined.
“At current levels, GSE stock is trading at an EV/LTM revenue multiple of 0.4x, compared to an average of 1.7x for the company’s peer group. We believe the company remains undervalued and the stock offers an attractive entry point for investors at these levels,” the analyst summed up.
That potential for profit leads Joshi to rate GVP a Buy, and set a $3 price target to suggest a high 261% one-year upside. (See GVP stock forecast)
Some stocks fly under the radar, and GVP is one of those. Joshi’s is the only recent analyst review of this company, and it is decidedly positive.
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
