Cameco Corporation (TSX:CCO)(NYSE:CCJ) is mired in a nasty five-year slump, and investors are wondering if this stock is finally finding a bottom.

Let’s take a look at the current situation to see if the uranium miner deserves to be a contrarian pick for your portfolio.

Fukushima impact

In early 2011 uranium traded for US$70 per pound, and Cameco’s investors enjoyed a rising stock price. Then the tsunami hit Japan and everything changed.

The Fukushima disaster was the worst nuclear accident since Chernobyl and immediately sent the uranium market into a five-year tailspin.

Japan shut down its entire fleet of nuclear reactors. To this day, only two are back online. Analysts expect the country to restart as many as 40 of the operable facilities, but the process is dragging on longer than expected due to legal holdups and operational challenges.

Today uranium trades for less than US$30 per pound, and Cameco can be bought for a mere $15.50 per share. Before the Fukushima disaster Cameco traded at $40 per share.

Cameco’s response

Cameco has done a good job of navigating the rout. The company cut expenses, reduced operating costs, and recently closed the firm’s longest-running mine, Rabbit Lake, which had been in operation since 1975.

Cameco is also reducing output at its McArthur River location, the world’s largest uranium mine. Production will continue to ramp up at the low-cost Cigar Lake facility.

Despite the difficult times, Cameco continues to deliver decent results and has maintained its dividend. The distribution currently offers a yield of 2.6%.

Market outlook

The uranium market remains oversupplied, but the long-term outlook suggests the situation should reverse course.

Primary supply is actually too low to meet existing demand, but secondary supplies are filling the gap. These stockpiles are being used up and the point will arrive when the market could face an acute shortage.

Cameco expects annual uranium demand to rise from the current level of 160 million pounds to 220 million pounds over the course of the next decade. Most mining companies have shelved plans to open new sites, and it can take up to a decade to get a new facility up and running.

Is it time to buy?

There is no rush to buy the stock today, but contrarian types with a buy-and-hold strategy should keep Cameco on the radar. At some point the market will recover, and this stock has huge upside potential when that happens.

Just released! One top stock for 2016 and beyond

Exports of liquefied natural gas could be one of the best growth opportunities out there for long-term investors. And, we think we've identified the Canadian company to invest in. It's a global company with operations across nearly 20 countries and 70 locations. We like it so much, we've named it as 1 Top Stock for 2016 and Beyond. To find out why, click here now to learn how to access your FREE copy today!


Let’s not beat around the bush – energy companies performed miserably in 2015. Yet, even though the carnage was widespread, not all energy-related businesses were equally affected.

We've identified an energy company we think offers one of the best growth opportunities around. While this company is largely tied to the production of natural gas, it doesn't actually produce the gas. Instead, it provides the equipment required to get natural gas from the ground to the end user. With diversified operations around the globe, we think it's a rare find in the industry.

We like it so much, we’ve named it as 1 Top Stock for 2016 and Beyond. To find out why, simply enter your email address below to claim your FREE copy of this brand new report, "1 Top Stock for 2016 and Beyond"!

Fool contributor Andrew Walker has no position in any stocks mentioned.