Although the worldwide quest for energy security has the potential to act as a lasting tailwind for the uranium mining and processing industry, weak fundamentals and frothy valuations of Cameco Corporation (CCJ), Uranium Energy Corp. (UEC), and Energy Fuels Inc. (UUUU) deem it wise to avoid them.
Since the beginning of the conflict in Ukraine, the redrawing of the global energy map has rendered ensuring energy security as important as the ongoing focus on the decarbonization of energy to slow down the effects of climate change.
This has brought nuclear energy into the limelight, which is capable not just of providing clean energy but also secure and affordable energy. The global market for uranium, a heavy metal, was valued at $2.74 billion in 2022 and is expected to expand at a 3.7% CAGR to $3.40 billion by 2028.
However, the recent plans of the United States to ban the import of Russian uranium could lead to significant volatility in the global uranium market. This could lead to the closure of nuclear power plants due to price increases in global uranium fuel.
Hence, although the uranium industry shows positive growth prospects, amid the current geopolitical turmoil, this may not translate into a sound rationale to invest in fundamentally weak and unattractively priced stocks.
In the above context, let us look closely at the featured stocks.
Cameco Corporation (CCJ)
CCJ is an integrated uranium supplier headquartered in Saskatoon, Canada. The company offers refining, conversion, and fuel manufacturing services through two segments: uranium and fuel services.
For the fourth quarter of the fiscal year that ended December 31, 2022, CCJ’s revenue and gross profit have increased by 12.7% and 16.1% year-over-year to C$524 million($389.91 million) and C$65 million ($48.37 million), respectively.
However, the company’s net loss attributable to equity shareholders came in at C$15 million ($11.16 million) or C$0.04 per share, compared to net earnings of C$11 million ($8.19 million) or C$0.03 per share during the previous-year quarter.
CCJ’s trailing-12-month gross profit and EBITDA margins of 33.68% and 21.91% are 27.6% and 35.8% lower than the respective industry averages of 46.52% and 34.14%. Likewise, the company’s trailing-12-month return on total capital of 2% compares unfavorably with the industry average of 9.99%.
Analysts expect CCJ’s revenue and EPS for the second quarter of the fiscal year, ending June 30, 2022, are expected to decrease by 19.1% and 21.4% year-over-year to $350.56 million and $0.11 per share.
The stock has declined 10.3% over the past month and 10.7% over the past year to close the last trading session at $25.40. In terms of its forward non-GAAP P/E, the stock is trading at 38.72x, significantly above the industry average of 8.50x. It has a 24-month beta of 2.06.
CCJ’s POWR Ratings are consistent with its uncertain outlook. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CCJ also has an F grade for Value and D for Growth, Stability, and Quality. It is ranked #34 of 36 stocks in the Industrial - Metals category.
Click here to access additional ratings for CCJ’s Momentum and Sentiment.
Uranium Energy Corp. (UEC)
UEC is engaged in the exploration, mining, pre-extraction, extraction, and processing of uranium concentrates and titanium minerals on projects located in the United States, Canada, and the Republic of Paraguay.
During the fiscal 2023 second quarter, which ended January 31, UEC’s sales and service revenues came in at $47.93 million, while its gross profit came in at $14.57 million. During the same period, the company’s total comprehensive income came in at $15.51 million, or $0.03 per share.
UEC’s trailing-12-month gross profit margin of 14.92% is 67.9% lower than the industry average of 46.52%, while its trailing-12-month EBITDA margin of negative 1.35% stands out in stark contrast to the industry average of 34.14%. Likewise, the company’s trailing-12-month return on total capital of negative 0.47% compares unfavorably with the industry average of 9.99%.
UEC’s stock, with a 24-month beta of 1.54, has plunged 24.1% over the past month and 29.2% over the past six months to close the last trading session at $2.84. Its forward non-GAAP P/E multiple of 177.50 is significantly higher than the industry average of 8.50.
It’s no surprise that UEC has an overall rating of F, which translates to a Strong Sell in our POWR Ratings system. It has an F grade for Value and Stability and a D for Growth and Quality.
Unsurprisingly, UEC is ranked last of 36 stocks in the Industrial - Metals category.
Click here for additional ratings for Sentiment and Momentum of UEC.
Energy Fuels Inc. (UUUU)
As a critical minerals company, UUUU is engaged in the extraction, recovery, and sales of uranium from mineral properties and the recycling of uranium-bearing materials generated by third parties.
For the fiscal year that ended December 31, 2022, although UUUU’s total revenue increased 293.1% year-over-year to $12.52 million, the company’s operating loss widened 26.9% year-over-year to $44.94 million.
This was due to increased expenses associated with preparing four of its uranium mines for production or operational readiness amounting to $2.4 million, development expenses associated with developing commercial REE separation capabilities, and expenses associated with advancing its medical isotope initiatives.
It also included expenses associated with the acquisition of the Bahia Project and the sale of the company's Alta Mesa project in Texas, and other selling, general, and administrative expenses.
As a result, the net loss attributable to UUUU for the fiscal year amounted to $59.85 million or $0.38 per share, compared to a net income of $1.54 million or $0.01 during the previous fiscal.
UUUU’s trailing-12-month gross profit margin of 37.32% is 19.8% lower than the industry average of 46.52%. Likewise, the company’s negative trailing-12-month ROCE, ROTC, and ROTA compare unfavorably with the respective industry averages of 21.56%, 9.99%, and 7.81%.
For the second quarter of the fiscal year 2023, UUUU is expected to register a loss of $0.05 per share, while its loss per share for the entire fiscal year is expected to come in at $0.14. Moreover, the company missed its consensus EPS estimates in the trailing three quarters.
The stock, with a 24-month beta of 3.05, has plummeted 19.5% over the past month and 41.2% over the past year to close the last trading session at $5.37. Its forward Price/Sales multiple of 23.79 is significantly higher compared to the industry average of 1.28.
UUUU’s bleak outlook is reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system. It also has an F grade for Value and D for Stability, Sentiment, and Quality.
UUUU is ranked penultimate in the same industry. Click here to see the additional ratings of UUUU’s Growth and Momentum.
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CCJ shares were trading at $25.32 per share on Wednesday morning, down $0.08 (-0.31%). Year-to-date, CCJ has gained 11.69%, versus a 6.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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