Constellation Energy (NASDAQ:CEG) stock increased by roughly 10% on Tuesday, even though the company’s Q1 results were mixed, with revenues exceeding estimates while earnings fell slightly below expectations. This increase is attributed to the company announcing it is close to finalizing long-term contracts for nuclear energy supply. These upcoming agreements provide Constellation with significantly better revenue predictability, catering to the rapidly growing U.S. electricity demand driven by server farms operating artificial intelligence applications, the increasing electrification of the automotive sector, and a shift away from fossil fuels in manufacturing. Additionally, the company claims that these contracts bolster the justification for its pending acquisition of Calpine for $16.4 billion, which is a leading operator of gas-fired power plants.
Despite the more optimistic outlook, Constellation Energy stock may not be a solid buy at its present market price of approximately $275. We have identified a couple of issues regarding CEG stock despite its relatively reasonable valuation.
We reach our conclusion by analyzing the current valuation of CEG stock against its operational performance in recent years as well as its present and historical financial health. Our examination of Constellation Energy across critical metrics such as Growth, Profitability, Financial Stability, and Downturn Resilience indicates that the company possesses a moderate operating performance and financial position, as described below. However, if you’re looking for upside potential with less volatility than individual stocks, the Trefis High-Quality portfolio offers an alternative, having surpassed the S&P 500 and achieved returns of over 91% since its launch.
How Does Constellation Energy’s Valuation Compare to The S&P 500?
Based on the amount you pay per dollar of sales or profit, CEG stock is currently valued in alignment with the wider market.
• Constellation Energy has a price-to-sales (P/S) ratio of 3.0 compared to a figure of 2.8 for the S&P 500
• Additionally, it has a price-to-earnings (P/E) ratio of 19.0 against the benchmark’s 24.5
How Have Constellation Energy’s Revenues Evolved Over Recent Years?
Constellation Energy’s Revenues have decreased slightly in recent years.
• Constellation Energy has recorded an average growth rate of 7.0% in its top line over the last 3 years (compared to a 6.2% increase for the S&P 500)
• Its revenues have declined by 5.4% from $25 billion to $24 billion in the past 12 months (in contrast to a growth of 5.3% for the S&P 500)
• Furthermore, its quarterly revenues dropped by 7.1% to $5.4 billion in the most recent quarter from $5.8 billion a year prior (versus a 4.9% improvement for the S&P 500)
How Profitable Is Constellation Energy?
Constellation Energy’s profit margins are lower than most companies within the Trefis coverage universe.
• Constellation Energy’s Operating Income was $4.8 billion over the last four quarters, which corresponds to a moderate Operating Margin of 20.6% (compared to 13.1% for the S&P 500)
• Constellation Energy’s Operating Cash Flow (OCF) during this period amounted to $-2.5 billion, indicating a very poor OCF Margin of -10.5% (relative to 15.7% for the S&P 500)
• For the last four-quarter period, Constellation Energy’s Net Income was $3.7 billion — suggesting a moderate Net Income Margin of 15.9% (compared to 11.3% for the S&P 500)
Is Constellation Energy Financially Stable?
Constellation Energy’s balance sheet appears strong.
• Constellation Energy’s total debt was $8.4 billion at the close of the most recent quarter, while its market capitalization stands at $86 billion (as of 5/6/2025). This results in a strong Debt-to-Equity Ratio of 11.8% (compared to 21.5% for the S&P 500). [Note: A lower Debt-to-Equity Ratio is preferable]
• Cash (including cash equivalents) constitutes $3 billion of the $53 billion in Total Assets for Constellation Energy, resulting in a moderate Cash-to-Assets Ratio of 5.7% (compared to 15.0% for the S&P 500)
How Resilient Is CEG Stock During Economic Downturns?
CEG stock has exhibited a greater negative impact than the benchmark S&P 500 index during several recent downturns. As investors hope for a mild landing from the U.S. economy, how severe could conditions become if another recession hits? Our dashboard How Low Can Stocks Go During A Market Crash illustrates how key stocks performed during and post the latest six market crashes.
Inflation Shock (2022)
• CEG stock plummeted 55.7% from a peak of $97.16 on 27 November 2022 to $43.09 on 23 February 2022, compared to a peak-to-trough decline of 25.4% for the S&P 500
• The stock completely regained its pre-Crisis peak by 25 November 2022
• Since that time, the stock reached a high of $347.44 on 26 January 2025 and currently trades at approximately $275
Summarizing: What This Means For CEG Stock
In conclusion, Constellation Energy’s performance across the metrics outlined above can be summarized 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 a few risks as well, making it a neutral choice.
While it may not appear that there is significant upside to CEG stock, the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (a combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices), has managed to deliver strong returns for investors. What is the reason? The quarterly rebalanced portfolio of large-, mid-, and small-cap RV Portfolio stocks provides a flexible way to optimize favorable market conditions while minimizing losses when markets decline, as highlighted in the RV Portfolio performance metrics.