4 uranium stocks to buy on the retail investor hype
Uranium price recently peaked in nine years. It is therefore not surprising that uranium stocks have increased.
Let’s first take a look at the factors that pushed the so-called yellowcake higher.
In addition to some improvement in fundamentals, the uranium surge can be explained by two reasons.
In July, RBC believed that social media activity had pushed uranium prices up. According to the RBC report, “the uranium market fundamentals have improved only modestly over the past 6 months compared to the sharp rise in stock values.
Sprott Asset Management the aggressive buying of uranium is another reason that has driven prices up in the recent past. The Financial Times reports that Sprott holds more than 28 million pounds of uranium, which, according to her, is enough to supply France for a year.
Getting back to the fundamentals, it seems there is a fear that the gap between supply and demand is widening. Statista data indicates potential demand for 209 million pounds of uranium concentrate by 2035. However, the supply will likely be limited to 114 million pounds of uranium. Clearly, new assets will be needed over the next decade to bridge the gap between supply and demand.
So it seems fair to conclude that uranium could be overheated, but is expected to remain in an uptrend in the next few years.
Let’s talk about four uranium stocks that are worth considering, as interest from retail investors has kept yellowcake a hot commodity.
- Cameco (NYSE:CCJ)
- Energy fuels (NYSEAMERICAN:UUUU)
- NexGen Energy (NYSEAMERICAN:NXE)
- Denison Mines (NYSEAMERICAN:DNN)
Uranium stocks to buy: Cameco (CCJ)
CCJ stock is perhaps the first name among uranium stocks. The stock experienced an uptrend supported by rising uranium prices. However, there appears to be more upside potential as the company has a strong asset base.
Currently, the company has the licensed capacity to produce over 53 million pounds of uranium concentrates. Further away, with 455 million pounds of proven and probable mineral reserves, the company has long term growth and cash flow visibility.
For the second quarter, the company reported revenue of $ 359 million and gross profit of $ 12 million. As operations ramp up, key margins are likely to improve. In the uranium segment, the company expects annual sales of $ 995 million (mid-range).
The production for the year of owned and operated properties is expected at 6 million pounds. Given the company’s licensed production capacity, there are many opportunities for scaling up operations if uranium continues to trend upward.
From a financial perspective, Cameco Corporation reported cash and cash equivalents of $ 1.2 billion in the second quarter. The company also has an unused credit facility of $ 1 billion. Therefore, there is great financial flexibility to pursue aggressive growth in exploration and production.
Energy fuels (UUUU)
With uranium prices trending upward, UUUU stock has risen 64% so far this year. The stock can be accumulated on corrections with the company positioning itself as a producer of rare earth element products. Besides uranium, Energy Fuels also produces vanadium and thorium.
The company claims to be the largest producer of uranium in the United States. By the end of 2021, the company expects to have a total uranium inventory of 691,000 pounds. In addition, the company has 1.67 million pounds of vanadium inventory.
Energy Fuels has a strong financial profile. The company has $ 79.4 million in debt-free cash. Therefore, there is sufficient leeway to pursue organic and acquisition-driven growth.
In the second quarter, the company estimated that “uranium prices have not risen enough to date to justify production in the Company’s mines and ISR facilities. “With an upward trend in uranium in the recent past, it seems likely that production will increase.
In addition, the company is also seeking an agreement with the US government to purchase uranium for the proposed US uranium reserves. Such an agreement can be a game-changer.
Uranium stocks to buy: NexGen Energy (NXE)
NXE stock appears to be an undervalued name among uranium stocks. Even after a rise of 69% for the current year, the upside potential is greater because uranium tends to rise.
In summary, NexGen Energy is a development stage company engaged in the exploration and evaluation of uranium reserves in Canada. The company believes that its Rook I project is the largest developmental uranium deposit in the world.
To put it in perspective, studies show that the asset can offer average annual production of 28.8 million pounds between the first and the fifth year. In addition, the mine has a total life of 10.7 years. Over the life of the mine, average annual production is expected to reach 21.7 million pounds.
NexGen Energy is currently trading at a market cap of $ 2.2 billion. The net present value after tax of the Rook I project is estimated at $ 3.47 billion. Obviously, the action seems well valued.
It should also be noted that the NPV is based on the current price of uranium. If yellowcake remains in an uptrend, the mine’s annual after-tax net cash flow may exceed $ 1 billion. NXE stock is therefore worth accumulating as a correction for bullish uranium investors.
Denison Mines (DNN)
Denison is another company involved in the exploration and development of uranium. The company’s assets are expected to deliver production in 2024. For the current year, DNN stock has been among the best performing in the industry. The title rose 111%.
The company’s flagship Wheel River development project has probable reserves of £ 109.4 million. Plus, the all-inclusive cost is $ 22.82 per pound. Therefore, if uranium continues to follow an upward trend, there are significant economic benefits to the project.
As a baseline scenario, the pre-tax NPV of the project is $ 1.31 billion. However, if the price of uranium is $ 65 per pound, the The NPV is probably $ 2.59 billion. With production still a few years away, the project appears to have a NPV of over $ 2 billion. It is with the basic assumption that the price of uranium remains firm. Therefore, DNN stock looks attractive with a current market cap of $ 1.1 billion.
In terms of risk, Denison has cash and cash equivalents of $ 84.8 million. It seems likely that further dilution of equity will be required to raise funds for project development. However, given the attractive economics of the project, the stock is worth considering when making corrections.
At the date of publication, Faisal Humayun had (directly or indirectly) no position in any of the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Faisal Humayun is a senior research analyst with 12 years of experience in credit research, equity research and financial modeling. Faisal is the author of over 1,500 stock-specific articles focusing on the technology, energy and commodities industry.