The Most Boring Stock That Might rocket in the Nuclear Decade
An unloved contractor with nuclear upside and a record backlog.
The Pitch
They built the CN tower and now they are probably the most slept on nuclear play in North America. They’re sitting on a record backlog, playing the long game, about to benefit from a mega-project boom in Canada and about to turn the corner on a few painful projects that hit during the inflation shock.
That company is Aecon Group, a sleepy Canadian infrastructure beast that’s quietly positioning itself as a critical player in the multi-decade grid and nuclear buildout.
This is $ARE.TO. It’s not flashy. But it’s durable, it’s overlooked, and it’s sitting right in the middle of key trends in North America.
What It Is
Aecon is Canada’s mega-project contractor. Subways, bridges, hydro dams, airports, nuclear reactors, you name it, they’re probably involved.
They’ve got fingers in just about every kind of large infrastructure pie:
· Urban transit: 25% interest in a $5.3B JV building and operating the Eglinton Crosstown LRT in Toronto.
· Bridges: 20% stake in the $5.7B Gordie Howe Bridge connecting Windsor to Detroit.
· Hydro: 30% of a massive hydro project in BC.
· Roads: A $615M contract to fix Calgary’s infamous Deerfoot Trail.
If you’ve driven it, waited for it, or complained about it, Aecon probably built it.
And the government is about to make their backlog grow like a weed. Canada’s latest infrastructure bill promises to fast-track major projects by slashing environmental red tape, reducing federal-provincial duplication, and giving long-awaited green lights to mega-projects like the $25B Gull Island hydro station. It’s like the bat signal for firms like Aecon. Additionally, Canada has committed to hike defense spending to 5% of GDP and 1.5% of this is earmarked for infrastructure.
The Nuclear Angle
Now here’s where it gets spicy.
Aecon isn’t just a jack-of-all-trades contractor, they’re emerging as a go-to player in nuclear refurbishment. With most North American reactors built in the 1970s, we’re staring down the barrel of a massive refurb cycle. Replacing them outright is a bad option, just ask Georgia Power, whose new reactors ran $19B over budget.
The shitshow in Georgia is quite bullish for Aecon in some sense though. Given the 30-year glut in construction of new nuclear plants western companies with the ability to execute are far and few between so should Aecon be able to competently progress on their Darling, Ontario new build they will likely to be brough on to play a role in future SMR developments in the US as well as Canada. Additionally, the situation is likely to further shift project demand further to SMRs as jurisdictions can dip their toes in the nuclear pool without betting their farm on a large risky project. SMRs are also generally viewed to be a cheaper source of power than large scale nuclear anyway.
Aecon is involved in multiple nuclear reactor refurbishments in Canada, plus a project in the U.S., and they’re building a new Small Modular Reactor (SMR) in Darlington, Ontario. They have already signed a collaboration agreement with Westinghouse, the Darling SMR is a GE Hitachi BWRX-300 and many of the Canadian refurbishment contracts are on CANDU reactors, so Aecon has experience across all of the key platforms.
To cap it off, in late 2024 they acquired United Engineers and constructors, a specialized U.S. nuclear and power contractor for $33M, a solid investment that nets Aecon key customer relationships and an ability to take on large projects that United could not manage on their own.
The Ugly Truth (But Getting Prettier)
So why isn’t everyone already piling in?
Two words: fixed-price contracts.
During the pandemic/inflation crunch, Aecon got stuck with some nasty legacy contracts signed when everything seemed cheaper. These dragged down margins and turned otherwise solid projects into capital sinkholes. But here’s the good news: the worst of it is almost over. Those troubled jobs wrap up by Q3 2025.
How bad did it get? Adjusted EBITDA for the 12 months ended March 2025 was just $53.3M, but strip out the garbage, and it would’ve been a juicy $346.6M.
Lesson learned. Management is shifting toward more flexible, cost-plus contracts. The market punished them, but the strategy shift is now in motion. The cost of this newfound caution? Gross margins will come in a bit lower.
By The Numbers
· Market Cap: $1.3B
· Net Debt: $420M
· EV/EBITDA (normalized): ~5x
· Backlog: Record $9.7B and rising
This thing is priced like a no-growth construction shop, but it’s really a platform play on the infrastructure supercycle.
Margins will likely settle closer to 7% going forward, a touch below historic highs (8.4%) but a fair trade-off for lower risk and more predictable outcomes.
What Sucks (Because It’s Not All Rainbows)
· Still cleaning up old messes: Legacy projects will be a drag for another quarter or two.
· Heavy dependence on government contracts: Not ideal if the political winds shift dramatically (but that risk cuts both ways). Federal government in Canada is going DOGE mode but transfers to provinces (who are the main govt customers) will apparently go untouched.
· Canada-focused: U.S. expansion is still early days, though that’s also the upside.
Governance and capital allocation
Overall governance at the corporation is fine, but there is not a ton of inside ownership. Interestingly the company’s former CEO and a member of the family that founded the current iteration of the company has been on the board since 1963 which probably makes him the longest serving director of any public company in Canada.
50% of the long-term incentive is linked to performance and this half is tied 50% to TSR relative to a peer group, 30% to EBITDA (non- adjusted) and 20% to injury rate which seems pretty reasonable.
In terms of Capital allocation, the company indicated that their M&A targets got bid up above the levels they were willing to pay. They also flagged that they need to invest in equipment for some of their new projects like the Alberta highway that they are working on, and in general their growth will create a drag on working capital. They do pay a small dividend with the yield on the stock being sub 2% and they mentioned that share buybacks are an attractive option for them.
The other thing I would like to add is that management and the board have been pragmatic. In 2017 when the founder was still the CEO he put the company up for sale and accepted an offer from a Chinese company that was eventually blocked on national security grounds. The company also divested their Ontario road construction business in 2023 as it was not providing great returns, likely due to less of a moat due to the smaller scale of the projects. Overall these things combined with the prudence on M&A give me confidence that any major decisions, and capital allocation policies will be made with due care.
Wrap Up
Aecon is hiding in plain sight. It’s not a flashy AI play or a moonshot SPAC. But it’s exactly the kind of durable operator you want at the center of a multi-decade reinvestment cycle.
The company has survived inflation hell, repositioned its contract mix, and is now lined up for earnings rebound with a record backlog and nuclear tailwinds.
It has already seen a strong breakout from lows but the valuation it is at is still super attractive and it can benefit from a multi-year, or even multi-decade theme. As such I am long.