Uranium futures rose to $63.70, the highest level since the Fukushima disaster of 2011, amid the Russia-Ukraine war and sanctions on uranium imports from Russia. Also, a bill has been put forward in both the U.S. House and the Senate to ban U.S. imports of nuclear fuel from Russia in retaliation for Russia’s invasion of Ukraine, while the European Union has banned coal imports from Russia. These sanctions are raising concerns about a supply shortage of Uranium, pushing its price up.
Uranium demand has also been increasing as countries worldwide explored alternative energy sources. However, the market’s growth could be disrupted by a decline in nuclear electricity generation, the shutting down of mine operations, and geopolitical issues. Furthermore, the shift to nuclear power is a challenging concept.
Nevertheless, for now, given the rising uranium prices, uranium stocks Cameco Corporation (CCJ), NexGen Energy Ltd. (NXE), and Denison Mines Corp. (DNN) have been surging in price. These stocks look now overvalued at their current price levels and we think could be best avoided now.
Cameco Corporation (CCJ)
CCJ in Saskatoon, Canada, produces and sells uranium. It operates through two segments, Uranium and Fuel Services.
In terms of its forward EV/Sales, CCJ is currently trading at 8.52x, which is 286.7% higher than the 2.20x industry average. Its 304.44 forward EV/EBIT multiple is 2811.6% higher than the10.5 industry average.
For its fiscal fourth quarter of 2021, CCJ’s revenue decreased 15.5% year-over-year to $465 million. Its gross profit declined 48.6% from its year-ago value to $56 million, while the net earnings attributable to equity holders declined 86.3% from the prior-year quarter to $11 million. Its EPS decreased 85% from the same period in the prior year to $0.03.
Analysts expect CCJ’s EPS to come in at a negative $0.03 for the quarter ended March 31, 2022, and a negative $0.02 for the quarter ending June 30, 2022.
The stock gained 13% in price over the past month to close yesterday’s trading session at $30.63. It has gained 40.4% year-to-date.
CCJ’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, which equates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
CCJ also has a Value, Growth, and Stability grade of D. Within the 37-stock, C-rated Industry - Metals industry, it is ranked #27.
Click here to see the additional POWR Ratings for CCJ (Momentum and Sentiment).
NexGen Energy Ltd. (NXE)
NXE is an exploration and development stage company engaged in the acquisition, exploration, evaluation, and development of uranium properties in Canada. The company is headquartered in Vancouver, Canada.
NXE’s 8.71 trailing 12 months Price/Book multiple is 332.3% higher than the 2.02 industry average.
For its fiscal third quarter, ended September 2021, NXE’s net comprehensive loss and loss per share came in at CAD15.17 million ($12.03 million) and CAD0.04, respectively, compared to the previous year's values of CAN21.76 million ($17.25 million) and CAN0.06. Its cash used in investing activities increased 95.8% year-over-year to CAN8.33 million ($6.60 million), while the cash provided by financing activities decreased by 65.2% from the prior-year quarter to CAN3.18 million ($2.52 million).
The Street expects the company’s EPS to remain negative at least until this year.
The stock has gained marginally intraday to close yesterday’s trading session at $6.23. The stock gained 42.6% year-to-date.
It is no surprise that NXE has an overall D rating, which translates to Sell in our POWR Ratings system.
NXE has an F grade in Value and a D in Growth and Quality. It is ranked #43 of 48 stocks in the D-rated Miners - Diversified industry.
To see the additional POWR Ratings for Momentum for NXE, click here.
Denison Mines Corp. (DNN)
Headquartered in Toronto, Canada, DNN acquires, explores for, develops, and sells uranium. It operates in the Mining segment; the Closed Mine Services segment; and the Corporate and Other segments.
In terms of its forward EV/Sales, DNN is currently trading at 139.27x, which is 6222.4% higher than the 2.20x industry average. Its 144.23 forward Price/Sales multiple is 9135.8% higher than the 1.56 industry average.
For its fiscal fourth quarter of 2021, DNN’s total revenues decreased 18.5% year-over-year to $3.34 million. Its net loss for the quarter came in at $2.65 million, while its loss per share was $0.01.
Analysts expect DNN’s EPS to remain negative at least until this year.
DNN’s shares have declined 1.1% in price intraday to close the last trading session at $1.73. It has gained 26.3% year-to-date.
DNN’s poor prospects are reflected in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
DNN also has an F grade in Value and a D grade in Stability, Growth, and Quality. It is ranked #46 in the Miners - Diversified industry.
Click here to see the additional POWR Ratings for Sentiment and Momentum.
Click here to check out our Industrial Sector Report for 2022
CCJ shares were trading at $31.00 per share on Tuesday afternoon, up $0.37 (+1.21%). Year-to-date, CCJ has gained 42.14%, versus a -7.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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