NuScale Power’s goal is to be a manufacturer, but there’s still a lot of work to be done.
NuScale Power (SMR 6.09%) is, at its core, a manufacturing business. It is also a nuclear power stock, since what it plans to build are small modular nuclear reactors (SMRs). Given the nuclear power renaissance currently taking shape, there is a big opportunity for NuScale Power to seize. And the company still has to make its first sale.
Industrials pay dividends
Wall Street has put NuScale Power into the nuclear energy investment bucket, which isn’t wrong. After all, the company is attempting to build a business around SMRs. However, SMRs are a lot different from large, site-built nuclear power plants. SMRs are built in factories so they can benefit from the efficiencies generated from scale production. At its core, NuScale Power is really an industrial manufacturer. Or at least that is what it hopes to be when it finally inks its first sale.
Image source: Getty Images.
Industrial stocks often pay dividends. And if the nuclear power renaissance is enough for NuScale Power to build a substantial business, it is highly likely that it would, one day, pay dividends, too. Such dividend payments, however, could be years away.
NuScale Power is going to bleed red ink for a long time
The problem is that NuScale Power has a reactor design, but no customers. It is working on a deal to sell six reactors to RoPower, a Romanian power company, but the final investment decision on that project hasn’t been made yet. NuScale is also working with the Tennessee Valley Authority and ENTRA1 Energy, but there’s no firm sale involved with this partnership yet, either.
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Until NuScale Power actually starts building its first SMRs, there’s no way to know how successful the business will be. There’s also no way to know if its SMRs are desirable enough for others to buy. Then there’s the small problem that NuScale Power needs to build out its manufacturing capacity, which will require large capital investments if it plans to scale up its business. Even after the first signed contract for an SMR, there’s still a lot that needs to be done.
Most investors should wait a bit
NuScale Power has an exciting story to tell. However, most investors should probably wait until it has actually built a few SMRs before investing in the hope of the stock being a millionaire maker and a reliable dividend stock. There is too much uncertainty at this point and only more aggressive investors should probably consider buying the stock.