Quick Value 4.12.21 ($BWXT)
Quick Value 4.12.21 ($BWXT)
BWX Technologies - Is making nuclear reactors a great business?
Market Performance
Market Stats
Going to repost some interesting charts I came across on Twitter over the past week…
Stocks trading over the 200-day moving average at record levels…
Coinciding with that…
Margin accounts are also hitting record levels…
Speculation starting to kick in?
Quick Value
BWX Technologies ($BWXT)
This was a spin-off from a few years ago. BWXT makes nuclear components and provides nuclear-related services mainly to the US military. There aren’t many companies out there with these capabilities so competition is pretty limited when it comes to building and servicing nuclear reactors.
This business generates pretty good margins and has a solidly growing backlog thanks to expanding naval spending.
The nuclear operations segment is the sole producer of nuclear reactors for naval ships. They’ve got great visibility into long-term production — much, much greater visibility than your typical public company.
This isn’t the cheapest stock in the market — 2021 estimates call for $3.15 in EPS — at $67 per share, that works out to 21x earnings. Management has been able to successfully grow earnings through cash deployment — from 2015 to 2020, earnings grew from $1.42 to $3.03 per share (in part thanks to lower tax rates).
BWXT has made a few acquisitions, pays out a small dividend (1.3% yield), and has repurchased some stock over the years. They are midway through a heavy capex cycle that should taper off in 2022-2023.
Overall, BWXT has the makings of a great business — low/no competitors, great earnings visibility, good margins — at a reasonable price of 21x forward earnings.