"And, given the federal government's continued push toward alternative energy, regulators have a vested interest in seeing USEC prosper and could help the company obtain financing for new projects by backing its debt or assisting in other ways.

"Right now, there are 104 nuclear power plants operating in the US, and those facilities get roughly half of their uranium from foreign sources. However, incoming shipments from Russia (which account for about 40% of the nation's fuel) are scheduled to be cut in half within the next five years.

"In short, USEC doesn't have the capacity to meet demand now, and supply could be even more restrained in the coming years -- meaning the company won't have to worry about finding customers. And until new capacity enters the market, prices should remain firm.

"And that's just here in the United States. Demand for nuclear power is also on the rise elsewhere around the globe. In fact, the World Nuclear Association is forecasting the addition of 70 new reactors by 2015.
"And keep in mind, USEC has already built up a sales backlog of $6.5 billion, more than triple the revenues it reported all of last year.

"At the moment, USEC is still operating out of its Paducah, Kentucky plant, which relies on an outdated, energy-intensive process. However, the company is rapidly moving forward with the most advanced uranium enrichment plant in the world, a state-of-the-art Ohio facility that will use energy-efficient centrifuge-based technology.

"Unfortunately, rising prices for everything from materials to labor have led to cost overruns, and the budgeted $2.3 billion plant is now projected to cost upwards of $3.5 billion. The increased cost has caused many frustrated investors to pull the plug, sending the shares spiraling from $25 to around $5.

"However, those with a less myopic viewpoint have plenty of reasons for optimism. According to Morningstar, the new centrifuge plant will require far less personnel to run and will operate on 95% less power, both of which should help profit margins expand considerably.

"Furthermore, many old contracts with utility customers (which were indexed to overall inflation
rather than faster-growing energy costs) are set to expire, and new contracts in force will allow for more favorable terms.

"USEC is a classic Ben Graham pick. The company is now trading at just five times trailing cash flows, offers a stable earnings outlook, and has a healthy balance sheet sporting $161 million ($1.46 per share) in net cash.

"And since the most recent financial snapshot, the company just paid $5 million to acquire a 74-acre uranium enrichment facility in Tennessee with an assessed value in excess of $13 million.

"Perhaps most important, net tangible assets have risen 45% over the past two years and currently stand at $1.3 billion, or roughly $11.84 per share -- meaning the stock is trading at less than half of its book value."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.