Constellation Energy Corporation (NASDAQ:CEG) traded at around $300 on October 7, down 0.27% on the day and 21.61% lower over twelve months. The company signed a 3,590 megawatt power agreement with Google, and the shares jumped roughly 12% on October 6.
Giving part of that back leaves a contract of unusual size attached to a stock still below where it traded a year ago.
Nobody Is Building a Competing Fleet:
Constellation’s advantage is that its largest assets could not be replicated at any price a buyer would pay. Licensing and building a nuclear plant in the United States takes more than a decade before a single megawatt is sold.
So when a hyperscaler needs firm power on a twenty-year contract, the list of counterparties is very short. That scarcity is widening rather than narrowing, because data center demand arrived faster than any new supply can.
The contracts are the moat made durable. A twenty-year agreement converts a commodity into something closer to a toll.
Revenue grew 23.00% in the most recent quarter, which is that demand showing up in the accounts. In January we ranked ten stocks for high returns. The one we put first has returned almost 30% since.
The Moat Is Wide, and the Cash Is Thin:
One pair of figures explains why the stock is still down over twelve months. Operating cash flow was $4.21 billion, and capital expenditure was $3.90 billion. That leaves free cash flow of $309.00 million, against $24.70 billion of debt on the balance sheet.
A fleet nobody can rebuild is also a fleet that costs a great deal to keep running, and the maintenance is not optional. Earnings fell 38.90% in the most recent quarter even as revenue grew 23.00%, so the growth is not reaching the bottom line.
Net margin of 11.08% above an 8.66% operating margin means some of the reported profit came from below the operating line. In May, we ranked this year’s best dividend performers. The one that finished first has since fallen 38%.
The Valuation Case:
Constellation traded at around $300 on October 7 and is worth $106.15 billion. Sustainability is the one thing the moat does guarantee, because the contracts run for twenty years and the plants are already built. On earnings, the stock sits at 29.37 times trailing and 22.49 times forward, with a PEG ratio of 3.74.
Enterprise value to EBITDA of 16.41 counts the debt and is the more honest measure for a capital-heavy generator. The dividend is small at a 0.57% yield on a $1.71 rate, which is what a company spending $3.90 billion a year can afford.
Conclusion:
The moat is widening, and the cash flow has not caught up. Nuclear licensing takes more than a decade, so a 3,590 megawatt agreement with Google has very few possible counterparties. Revenue grew 23.00% on that demand. However, $3.90 billion of capital spending against $4.21 billion of operating cash flow leaves only $309.00 million of free cash flow to service $24.70 billion of debt. Earnings fell 38.90% in the same quarter revenue grew 23.00%. The number to watch is free cash flow, because $309.00 million is what the widest moat in American power is currently converting to cash.
Market Sentiment:
Constellation Energy Corporation was held by 73 hedge funds with a combined stake value of about $2.67 billion at the end of Q2 2026 in the Insider Monkey database. This is down from 79 hedge fund holders with a cumulative investment value of around $3.38 billion in the previous quarter.
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This article is originally published at Insider Monkey.
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