Better Energy Stock: ExxonMobil vs. Cameco

Energy is the lifeblood of our economy, fueling factories, transportation, homes, and data centers. In recent years, the energy sector has come into focus as the use of artificial intelligence (AI) grows and companies scramble to build data centers.

Nuclear energy is seen as one key energy source of the future, and investors are piling into uranium miners and nuclear reactor developers at an accelerating pace. Cameco (NYSE: CCJ), the Canadian-based uranium miner, has seen its stock surge nearly 80% over the past years.

On the other hand, oil and gas giants like ExxonMobil (NYSE: XOM) have lagged in recent years due to falling commodity prices. However, there is an opportunity in natural gas that investors shouldn't overlook, and the company trades at a significantly lower valuation.

If you're searching for energy stocks to add to your diversified portfolio, Cameco and ExxonMobil are strong names to consider. However, before you buy, consider the following.

Cameco stands to benefit from growing nuclear infrastructure

Cameco's long-term opportunity is in the expansion of nuclear energy. As countries face rising electricity demand and seek to decarbonize, nuclear power is emerging as a popular choice. More recently, numerous countries have committed to tripling their nuclear capacity by 2050, which should be a long-term tailwind for industry players.

Nuclear power directly addresses the intermittency of wind and solar by delivering reliable, zero-carbon baseload electricity. The United States has placed emphasis on expanding its nuclear capabilities and will seek to streamline the construction of nuclear power plants. Additionally, emerging technologies such as small modular reactors (SMRs) and microreactors offer opportunities for future growth in the nuclear sector.

Exxon's natural gas business opportunity

ExxonMobil is an integrated oil and gas company with operations spanning the entire oil and gas value chain. Its business includes the exploration and production of oil and gas, the refining of raw materials into fuels and other products, and the manufacturing of petrochemicals and other specialty materials. By diversifying across the oil and gas value chain, Exxon's business is more resilient than that of companies that focus solely on exploration and production.

The oil and gas giant has extensive assets across key regions like the Permian Basin and Guyana. While it's known for its oil business, there is a real long-term opportunity in natural gas. That's because natural gas is a growing source of fuel for electricity generation, heating, industrial processes, and fertilizer production. Due to its abundance and cleaner-burning properties, it plays a crucial role in modern energy production and can serve as a "bridge" fuel as other renewable energy sources are developed.

In Guyana, gas is produced alongside oil and serves as a strategic asset for power generation and LNG development over time. This "associated gas" has historically been a byproduct of oil production, but it could become a more valuable product over time. Exxon also has a global liquefied natural gas (LNG) portfolio, including operations in Papua New Guinea and equity stakes in Qatar's major LNG expansion projects. It aims to double its global LNG supply portfolio by 2030 (compared to 2020).

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Evaluating valuations for ExxonMobil and Cameco

One of the most significant drawbacks for Cameco and others in the nuclear space is that the stocks have gotten quite expensive over the past couple of years. This reflects the growing long-term opportunities for these companies, but also indicates that investor enthusiasm has driven valuations to sky-high levels.

For example, the 20 analysts covering Cameco estimate it could earn $1.52 in earnings per share (on a non-GAAP basis) in 2026, giving the stock a valuation of nearly 65 times those projected earnings. While Cameco could see strong growth, its expensive valuation could make it vulnerable to significant price swings.

In comparison, ExxonMobil is priced at 17 times its projected 2026 earnings, making it a more compelling option for value investors. Not only that, but analysts think it can grow earnings by 21% in 2027 and nearly 12% in 2028.

Which stock is right for you?

Cameco is a solid stock to play the nuclear energy revolution, but it is expensive. The premium reflects strong growth expectations, but also increases downside risk if growth fails to materialize and those expectations aren't met. This makes Cameco best suited for growth investors who are optimistic about the long-term prospects of the nuclear industry.

ExxonMobil is a relatively inexpensive stock with a strong balance sheet and a history of dividend increases, offering an attractive opportunity in the natural gas and LNG space. For value-focused investors seeking a more attractive price, ExxonMobil is a better option.

Courtney Carlsen has positions in Cameco and ExxonMobil. The Motley Fool has positions in and recommends Cameco. The Motley Fool has a disclosure policy.