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Nano Nuclear Energy is designing microreactors.
Nano has not commercialized a nuclear reactor and is working through the NRC regulatory process.
With about $3.5 billion in annual revenue, Nano could support a $17.5 billion market cap, about 15 times higher than today's valuation.
Nano Nuclear Energy (NASDAQ: NNE), as its name suggests, is designing microreactors. Picture, for a second, a nuclear reactor packed into a shipping container. That, in an image, is what Nano is trying to accomplish.
The company isn't earning commercial revenue from its reactors yet, nor does it have an NRC-approved design. As such, it's very much an early-stage nuclear company with high ambitions and plenty of "unknowns" that could ruin them.
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The near-term path for this nuclear stock will be more turbulent than comforting -- risk-tolerant investors only at this point -- but if you can hold fast without letting go, this nuclear stock could be a long-term winner, possibly even growing 15 times by 2040.
How could that happen? Let's run a quick scenario. Let's assume Nano has 70 million shares outstanding (it currently has about 52.1 million, but dilution will likely happen). If those shares were worth about $250 apiece, the company would carry a $17.5 billion market cap. Now, supposing Nano trades at 5 times annual sales, then its annual revenue would need to be about $3.5 billion.
Great, you might think, the back-of-the-envelope math checks out. But, practically speaking, could Nano's annual revenue grow to $3.5 billion by 2040?
It's not outlandish, but operationally it would be ambitious. Indeed, several things would need to go right. Its microreactors would need to clear regulatory hurdles, and deployments would need to become routine. The company would also need to advance its transportation and fuel-related operations, plus rake in recurring revenue from services and consulting work.
Suppose, purely for illustration purposes, that Nano recognized $100 million in revenue from each reactor deployment. To reach $3.5 billion, it would need to deploy about 35 reactors a year. That doesn't mean it needs 35 customers; its reactors are so small that a single project could deploy a dozen or more units. A handful of big projects could, therefore, carry Nano most of the way toward the revenue needed to support a multibillion-dollar valuation.
Don't get me wrong: Nano isn't a safe stock, and the volatility might make the least risk-tolerant investors uneasy. Aggressive investors who want exposure to advanced nuclear and AI energy might want to proceed; however, more risk-averse investors might be more interested in a nuclear energy exchange-traded fund (ETF).
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Steven Porrello has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
