Constellation Energy (NASDAQ:CEG) stock surged by about 10% on Tuesday despite the company’s mixed Q1 results, which saw revenues beat estimates, although earnings fell slightly short. The gains come as the company indicated that it was on the verge of signing long-term deals to supply nuclear energy. These new agreements give Constellation considerably more revenue visibility while catering to the fast-growing U.S. electricity consumption, which is being led by demand from server farms running artificial intelligence applications, the growing electrification of the auto industry, and a pivot away from fossil fuels in the manufacturing industry. Moreover, the company also says that the deals strengthen the case for its pending $16.4 billion deal for Calpine, a major operator of gas-fueled power plants.
Image by Kurt Klement from Pixabay
Despite the more upbeat outlook, Constellation Energy stock may not be a strong buy at its current market price of around $275. We believe there are a couple of concerns with CEG stock, despite its relatively fair valuation.
We arrive at our conclusion by comparing the current valuation of CEG stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Constellation Energy along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a moderate operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative, having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How Does Constellation Energy’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, CEG stock is currently valued in line with the broader market.
• Constellation Energy has a price-to-sales (P/S) ratio of 3.0 vs. a figure of 2.8 for the S&P 500
• And, it has a price-to-earnings (P/E) ratio of 19.0 vs. the benchmark’s 24.5
How Have Constellation Energy’s Revenues Grown Over Recent Years?
Constellation Energy’s Revenues have declined marginally over recent years.
• Constellation Energy has seen its top line grow at an average rate of 7.0% over the last 3 years (vs. increase of 6.2% for S&P 500)
• Its revenues have shrunk 5.4% from $25 Bil to $24 Bil in the last 12 months (vs. growth of 5.3% for S&P 500)
• Also, its quarterly revenues shrank 7.1% to $5.4 Bil in the most recent quarter from $5.8 Bil a year ago (vs. 4.9% improvement for S&P 500)
How Profitable Is Constellation Energy?
Constellation Energy’s profit margins are worse than most companies in the Trefis coverage universe.
• Constellation Energy’s Operating Income over the last four quarters was $4.8 Bil, which represents a moderate Operating Margin of 20.6% (vs. 13.1% for S&P 500)
• Constellation Energy’s Operating Cash Flow (OCF) over this period was $-2.5 Bil, pointing to a very poor OCF Margin of -10.5% (vs. 15.7% for S&P 500)
• For the last four-quarter period, Constellation Energy’s Net Income was $3.7 Bil – indicating a moderate Net Income Margin of 15.9% (vs. 11.3% for S&P 500)
Does Constellation Energy Look Financially Stable?
Constellation Energy’s balance sheet looks strong.
• Constellation Energy’s Debt figure was $8.4 Bil at the end of the most recent quarter, while its market capitalization is $86 Bil (as of 5/6/2025). This implies a strong Debt-to-Equity Ratio of 11.8% (vs. 21.5% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $3 Bil of the $53 Bil in Total Assets for Constellation Energy. This yields a moderate Cash-to-Assets Ratio of 5.7% (vs. 15.0% for S&P 500)
How Resilient Is CEG Stock During A Downturn?
CEG stock has seen an impact that was worse than the benchmark S&P 500 index during some of the recent downturns. 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.
Inflation Shock (2022)
• CEG stock fell 55.7% from a high of $97.16 on 27 November 2022 to $43.09 on 23 February 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 25 November 2022
• Since then, the stock has increased to a high of $347.44 on 26 January 2025 and currently trades at around $275
Putting All The Pieces Together: What It Means For CEG Stock
In summary, Constellation Energy’s performance across the parameters detailed above are as follows:
• Growth: Neutral
• Profitability: Weak
• Financial Stability: Strong
• Downturn Resilience: Neutral
• Overall: Neutral
This aligns with the stock’s moderate valuation, leading us to conclude that CEG is reasonably priced but has couple of risks as well, making it a neutral pick.
While it doesn’t look like there is much upside to CEG stock, the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
