Cameco Corporation (TSX:CCO)(NYSE:CCJ), one of the world’s largest producers of uranium, announced first-quarter earnings results on the morning of April 29, and its stock responded by remaining relatively unchanged in the trading session that followed. Let’s take a closer look at the results to determine if this lack of movement represents a long-term buying opportunity, or if there is an underlying issue holding the stock back.
A very strong first-quarter performance
Here’s a summary of Cameco’s first-quarter earnings results compared with its results in the same quarter a year ago.
|Metric||Q1 2015||Q1 2014|
|Adjusted Earnings Per Share||$0.18||$0.09|
|Revenue||$566 million||$419 million|
Source: Cameco Corporation
Cameco’s adjusted earnings per share increased 100% and its revenue increased 35.1% compared with the first quarter of fiscal 2014, as its adjusted net income increased 92% to $69 million. The company noted that these very strong results could be attributed to revenues increasing in all three of its major segments, including 203.1% growth to $97 million in its NUKEM segment, 65% growth to $66 million in its Fuel Services segment, and 5.7% growth to $368 million in its Uranium segment, driven by its total sales volume of uranium increasing 1.4% to seven million pounds and the average realized price of uranium increasing 4.3% to $52.74 per pound.
Here’s a breakdown of eight other notable statistics from the report compared with the year-ago period:
- Total uranium produced and purchased increased 11.4% to 7.8 million pounds
- Uranium produced decreased 10.5% to 5.1 million pounds
- Uranium purchased increased 107.7% to 2.7 million pounds
- Average unit cost of sales increased 9.5% to $36.47 per pound
- Gross profit increased 19% to $129 million
- Gross margin contracted 300 basis points to 22.8%
- Cash provided by operations increased 1,811.2% to $133.56 million
- Ended the quarter with $557.89 million in cash and cash equivalents, an increase of 47.5% from the end of year-ago period
Cameco also announced that it will be maintaining its quarterly dividend of $0.10 per share, and the next payment will come on July 15 to shareholders of record at the close of business on June 30.
Should you be a buyer of Cameco?
I think the lack of movement in Cameco’s stock represents nothing more than a long-term buying opportunity. I think this because it was a very strong quarter and because the stock trades at attractive valuations, including just 17.1 times fiscal 2015’s estimated earnings per share of $1.23 and only 14.8 times fiscal 2016’s estimated earnings per share of $1.42, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 28.2 and the industry average multiple of 22.8.
In addition, Cameco pays an annual dividend of $0.40 per share, giving its stock a 1.9% yield at current levels, and I think this dividend could grow if the company delivers double-digit earnings per share and revenue growth in fiscal 2015.
With all of the information above in mind, I think Cameco represents one of the best long-term investment opportunities in the basic materials sector today. Foolish investors should take a closer look and strongly consider initiating positions.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joseph Solitro has no position in any stocks mentioned.