The uranium spot price has dropped by approximately 18% since January, below the $85 handle. As such, numerous uranium stocks have shed weight, concurrently casting doubt over the industry.
Falling uranium prices are a severe headwind. However, as a contrarian, I believe uranium’s recent decline has sparked a buying opportunity, especially given the ongoing worldwide energy shortage. Thus, I embarked on a journey to find three best-in-class uranium stocks to buy. My screening process focused on fundamental aspects, valuation multiples and technical analysis. Moreover, risk assessment was phased in where necessary to ensure complete alignment.
Considering the above, here are three top-tier uranium stocks to watch.
Cameco (CCJ)
Bank of America (NYSE:BAC) analysts dubbed Cameco (NYSE:CCJ) a top pick based on North American energy demand. Although an isolated opinion, I concur with Bank of America’s outlook, given nuclear energy’s inclusion in the North American energy mix. Moreover, Cameco is known as the world’s largest uranium producer, meaning its market share allows for preferential treatment and economies of scale.
Cameco released its first-quarter financial results in April, revealing a revenue miss of $128.21 million and an earnings-per-share miss of 16 cents. However, the event didn’t deter CCJ stock, as it has traded flat ever since. Although Cameco’s earnings defeat was an adverse event, many investors, including myself, remain optimistic about the company’s outlook because numerous catalysts have emerged. For example, synergies related to the firm’s recent acquisition of Westinghouse could soon be realized, adding significant operating advantages. In addition, Cameco might be assisted with a uranium price rebound in late 2024 amid an upward-sloping futures curve.
CCJ stock has shed nearly 10% of its market value in the past month, dragging its relative strength index into the 30s. Moreover, CCJ has a forward price-to-sales ratio of 10.96x, which I deem low for a growth stock.
Although a risky bet, CCJ stock looks destined to win!
Uranium Energy Corp (UEC)
Uranium Energy Corp (NYSE:UEC) is an underestimated uranium producer; it’s as simple as that. The company is one of the largest resource and landholders in Canada’s Athabasca Basin. Moreover, unlike Cameco, which mines a large amount of its deposits in Kazakhstan, Uranium Energy Corp is a North American pure-play, meaning it is unhinged by the current geopolitical tensions between Eastern Europe and Russia.
According to geophysical studies, Uranium Energy Corp’s Canadian projects alone contain 109.87 million pounds of measured and inferred deposits. Additionally, the firm has a 14.95% stake in Uranium Royalty Corp (NASDAQ:UROY) and owns two expansive processing plants. Uranium Energy Corp is a vertically integrated gem, illustrated by its operating profit margin of 29.42%.
Lastly, UEC stock has a price-to-sales ratio of 7.85x, which is reasonable considering its forward revenue growth forecast of 89.30%.
I’m bullish here, folks!
Paladin Energy (PALAF)
Paladin Energy (OTCMKTS:PALAF) is an Australian-based uranium company. However, it mines most of its resources in Namibia via the Heinrich Mine, of which it owns 75%.
Although Paladin has delivered tangible results, it remains in early-stage exploration mode. For instance, the firm is developing numerous projects in North America and Australia. Moreover, Paldin recently agreed to acquire Fission Uranium for C$1.14 billion, providing access to tier 1 uranium and regional synergies.
I added Paladin Energy to the list as a diversification vehicle. Cameco and Uranium Energy Corp are established players. However, Paladin Energy is an early-stage growth stock, which could add a different dynamic to your portfolio. The firm’s aggressive capital expenditure roadmap might result in volatility, but its long-term results seem promising.
Paladin Energy’s stock has surged by approximately 60% year-over-year. As such, the question naturally becomes: Is PALAF stock overpriced? Although a pullback is possible, I deem the stock underpriced based on its growth story.
On the date of publication, Steve Booyens did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
