Investors have had quite the ride with BWX Technologies (NYSE: BWXT) over the past year. The stock experienced an impressive climb from $88 to $132 in a matter of five months last year, only to drop 21% from its November peak. Naturally, this rollercoaster movement has raised questions among shareholders about what might be influencing this nuclear leader.
The negative sentiment surrounding BWX is not hard to pinpoint. There’s noticeable concern about the company’s Government Operations segment, particularly since fourth-quarter revenue fell by 1% compared to the previous year. Some market watchers are also uneasy about the stock’s volatility, wondering if BWX’s recent spate of acquisitions—such as the purchase of A.O.T. in January and the planned acquisition of Kinectrics—might sidetrack the management from focusing on their primary operations.
Still, it begs the question: Are investors missing the bigger picture?
BWX Technologies holds a crucial role in the defense and energy infrastructure of the United States. It stands as the exclusive producer of naval nuclear reactors for the U.S. Navy’s submarines and aircraft carriers. This unique market position is bolstered by national security interests and a long-standing expertise that isn’t easily challenged by rivals.
In addition to defense, BWX is aggressively expanding in the commercial nuclear energy and medical sectors. They’ve recently bagged contracts for North America’s first small modular reactor project and obtained significant equipment orders necessary to extend the life of Ontario’s Pickering nuclear plant. Meanwhile, their medical radioisotope division is gaining traction with new agreements signed with radiopharmacy networks.
The financial figures paint an intriguing picture as well. In 2024, the company saw an 8% increase in annual revenue, reaching $2.7 billion. Adjusted EBITDA grew by 6% to $499 million, and free cash flow skyrocketed 20% to $255 million, equipping management with resources for strategic purchases and rewarding shareholders.
Looking to the future, BWX’s guidance for 2025 suggests continued growth. They anticipate revenue to hit around $3 billion, with adjusted EBITDA projections ranging from $550 million to $570 million.
There’s undoubtedly much going for BWX Technologies, even if there are a few legitimate concerns.
Now, let’s turn to The Value Meter and see how this nuclear specialist stacks up. With an enterprise value-to-net asset value (EV/NAV) ratio of 11.23, BWX is above the 7.89 average for firms with positive net assets. However, its free cash flow averaged 5.53% of net assets over the last four quarters, topping the 4.53% average for its peers.
Factoring in BWX’s strong competitive stance in naval nuclear propulsion alongside its expanding footprint in the commercial nuclear and medical fields, the stock still presents as a reasonable investment despite its recent ups and downs.
The Value Meter rates BWX Technologies as “Appropriately Valued.”
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