Constellation Energy (NASDAQ: CEG) is an independent power producer, not a regulated utility. Its stock has fallen around 15% from its 52-week high.
The company operates outside the regulated utility model, selling power at market-based rates. It owns a large nuclear reactor fleet, making it the largest nuclear power operator in the United States. Constellation Energy also runs natural gas plants and renewable assets. It just completed the acquisition of natural gas-focused Calpine, creating the nation's largest electricity producer.
Electricity demand is increasing rapidly, driven by technologies like artificial intelligence and electric vehicles. Constellation Energy appears well positioned for this growth.
However, the stock has risen 280% over the past three years. The S&P 500 index is up nearly 75% in that period, while the average utility gained only 20%. This 280% figure includes the recent roughly 15% decline since around October 2025.
Since October, Constellation Energy's stock has underperformed both the S&P 500 and the average utility. Even after the pullback, its price-to-earnings ratio is nearly 38 times, and its price-to-book value ratio is around 7.2 times. The S&P 500's P/E ratio is 28 times with a P/B of 5.2 times. The average utility, using Vanguard Utilities ETF (NYSEMKT: VPU) as a proxy, has a P/E of 22 times and a P/B of 2.4 times.
Investors continue to price significant optimism into the stock. The premium valuation is likely tied to the company's nuclear power segment, which has seen renewed interest due to demand for cleaner electricity. Most companies in the industry have seen stock price advances.
Constellation Energy is moving to reopen once-shuttered nuclear plants. But Wall Street often becomes overly enthusiastic, stretching valuations of favored companies. Given the lofty valuation, that appears to have happened here.
It looks like Constellation Energy has positioned itself well for the future, and investors have rewarded it with a high valuation. This remains true even after the 15% pullback. Most investors may be better off keeping the stock on their watch list until the price comes down.
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