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Investing in commodity-focused businesses, such as Energy Fuels (UUUU), can be a higher-risk strategy due to the cyclical nature of these sectors. However, uranium prices (UXM24) are up more than 18% from their November lows amid concerns over a potential supply crunch, and should continue to move higher in the upcoming decade as the world transitions towards cleaner energy sources.
Since May 2019, uranium prices have almost quadrupled due to robust demand. Currently, the markets are assessing the impact that a U.S. ban on Russian imports might have on uranium prices in the near term. President Joe Biden just signed a bill banning uranium imports from Russia, a country that accounts for 25% of the supply in the U.S. and 50% of the global supply.
More broadly, long-term demand for uranium is expected to remain strong as leading world economies aim to increase exposure to nuclear power by a wide margin through 2050, making stocks such as Energy Fuels enticing investment options right now.
Is Energy Fuels Stock a Good Buy Right Now?
Energy Fuels (UUUU) is a critical minerals company valued at $986 million by market cap. It’s a leading producer of uranium, and mines natural uranium concentrates sold to major nuclear facilities that generate carbon-free nuclear energy.
UUUU stock is up 131.9% in the last five years, easily outpacing the broader markets. However, it also trades 47% below all-time highs, allowing you to buy the dip right now.
In the March quarter, Energy Fuels sold 300,000 pounds of triuranium octoxide (U3O8), a compound of uranium, for $25.31 million, indicating a realized price of $84.38 per pound. These sales resulted in a gross profit of $14.26 million, translating to a margin of 56%.
In Q1, Energy Fuels renewed an alternate feed agreement with a key customer, providing it with a multi-year low-cost source of 11,000 to 30,000 pounds of U3O8. Further, Energy Fuels continued uranium ore production at two mines in Utah. Once production is ramped up at these mines, the company expects to mine between 1.1 to 1.4 million pounds of U3O8 each year.
In Q1 of 2024, Energy Fuels reported an operating income of $2.02 million and a net income of $3.64 million. It ended Q1 with more than $220 million in liquidity and no balance sheet debt. Its liquidity reserves include cash, marketable securities, and inventory. At current prices, its product inventory has a market value of $40.82 million.
For the full year, Energy Fuels expects to produce between 150,000 and 500,000 pounds of finished U3O8 from newly mined conventional ore, stockpiled ore, and recycled feed materials.
Is Energy Fuels Stock Undervalued?
Out of the seven analysts covering UUUU stock, six recommend “strong buy,” and one recommends “moderate buy.”
Energy Fuels is forecast to end 2025 with adjusted earnings of $0.17 per share, compared to earnings of $0.62 per share in 2023. So, priced at 36.5 times forward earnings, the uranium stock is quite expensive.
However, it's a growth stock that commands a premium valuation. For instance, analysts expect the company to increase sales from $38 million in 2023 to $254 million in 2024. It's evident that Energy Fuels is investing heavily in capital expenditures, which should translate to steady cash flows at scale.
The average analyst price target for UUUU stock is $9.70, indicating an upside potential of more than 59% from current levels.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
