Constellation Energy Group (NASDAQ: CEG) has seen a significant boost in its stock performance over the past month. This surge is primarily fueled by investor excitement following recent executive orders from U.S. President Donald Trump. These orders aim to streamline the nuclear energy sector by directing the nation’s independent nuclear regulatory commission to reduce regulations and accelerate the licensing process for new reactors and power plants. These directives are part of a broader effort to increase U.S. nuclear energy production, a move that comes amid soaring demand from data centers and the artificial intelligence industry. Despite this strong market momentum, concerns about Constellation Energy’s valuation persist. As an aside, see What Sparked UNH Stock Crash?
While Constellation Energy’s recent performance is notable, it pales in comparison to some of its peers in the nuclear energy sector. Oklo has posted an impressive 120% gain in the last month, Centrus Energy is up over 80%, NuScale has climbed 109%, and Vistra has seen a 26% increase. Notably, Constellation Energy Group is significantly larger, with a market capitalization of $97 billion, exceeding the combined market capitalization of the other four companies mentioned.
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Stretched Valuation
One of the primary concerns for Constellation Energy Group stock is its valuation, which appears stretched. CEG is currently trading at a premium, with a price-to-sales (P/S) ratio of 4.1. This is notably higher than the S&P 500’s average P/S ratio of 3.0. Furthermore, its price-to-earnings (P/E) ratio stands at 33x, surpassing the benchmark index’s 26x.
While this P/S ratio might not seem excessively high at first glance, it’s crucial to note that CEG typically trades at a lower multiple. In fact, its current P/S ratio of 4.1x is more than double its average of 1.9x over the past three years, indicating a significant upward shift in its valuation.
Growth: Mixed Signals
Constellation Energy Group’s recent growth trajectory presents a somewhat mixed picture. While the company has achieved an average annual revenue growth rate of 7% over the past three years, its most recent fiscal year saw a 5% decline in revenues, settling at $23.6 billion. For the last twelve months, that figure stood at $24.2 billion.
However, there’s a more positive note from its most recent quarterly results, which showed a 10.2% year-over-year jump in revenue. Looking ahead, CEG is in the process of acquiring Calpine Corporation, a move that is expected to boost its sales growth. Calpine brings a substantial portfolio of natural gas, geothermal, battery storage, and solar assets with over 27 gigawatts of generation capacity. Additionally, it includes a competitive retail electric supplier platform that serves approximately 60 terawatt-hours of load annually. Still, based on consensus estimates, the company’s sales are projected to reach $23.4 billion in 2026, representing a marginal decline from the $23.6 billion recorded last year.
Profitability: Mixed With Challenges
Constellation Energy’s profitability metrics present a mixed picture, with some areas indicating challenges. Over the past four quarters, the company reported an Operating Income of $4.7 billion, translating to an Operating Margin of 19.4%. This figure actually surpasses the S&P 500’s average of 13.2%.
However, a significant concern arises from its Operating Cash Flow (OCF), which was negative $1.6 billion over the same period, resulting in a very poor OCF Margin of -6.8%, notably lagging behind the S&P 500’s 14.9%.
Despite this, Net Income totaled $3.0 billion, yielding a moderate Net Income Margin of 12.3%, which aligns with the S&P 500’s 11.6%. This combination of strong operating and moderate net income margins alongside negative operating cash flow suggests a need to address cash generation efficiency despite otherwise good profitability.
Financial Stability: Fine But Has Room For Improvement
Constellation Energy’s balance sheet appears generally solid, though with areas for potential enhancement. At the end of the most recent quarter, the company reported $8.4 billion in debt against a substantial market capitalization of $97 billion (as of May 27, 2025). This results in a strong Debt-to-Equity Ratio of 9.1%, which is considerably lower and more favorable than the S&P 500’s average of 19.9%.
However, a less favorable aspect is its liquidity. Constellation Energy holds $1.8 billion in cash and cash equivalents, which constitutes only 3.5% of its total assets of $52 billion. This poor Cash-to-Assets Ratio falls significantly below the S&P 500’s average of 13.8%, indicating less immediate liquidity compared to many peers. While its debt management is robust, the company’s lower cash reserves suggest less flexibility for immediate strategic maneuvers or cushioning against unforeseen market shifts.
Downturn Resilience: A Stronger Performance
In contrast to some other companies, Constellation Energy Group stock has demonstrated greater resilience than the benchmark S&P 500 index during recent economic downturn. During the 2022 inflation shock, CEG stock experienced a 24.5% decline, falling from a high of $97.16 on November 25, 2022, to $73.40 on March 23, 2023.
This performance was slightly better than the S&P 500’s peak-to-trough decline of 25.4% during the same period. Notably, CEG stock fully recovered to its pre-crisis peak by July 25, 2023. Since then, the stock has continued its upward trajectory, reaching a high of $347.44 on January 26, 2025, and currently trades around $310. This history suggests a more robust ability to withstand macroeconomic shocks compared to some of its counterparts.
While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
The Verdict?
Constellation Energy stands as a prominent player in the evolving energy sector, particularly with its leadership in carbon-free power generation, primarily through its nuclear fleet. The company exhibits robust fundamentals, including strong operating margins. However, a key point of consideration is CEG’s history of negative free cash flow, indicating substantial capital expenditures that add on to negative cash flows from operations.
We believe that CEG’s current valuation metrics points to an elevated entry point for value-oriented investors, despite positive investor sentiment and its strong long-term strategic vision in clean energy. Potential investors should carefully weigh CEG’s growth prospects against the financial implications of its substantial capital outlays and premium pricing.
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