1 Canadian Mining Stock to Buy and Hold Forever

Here’s why investors can consider investing in this blue-chip TSX mining stock right now.

| More on:
A worker wears a hard hat outside a mining operation.

Source: Getty Images

Mining stocks are companies focused on exploring, extracting, and processing deposits of valuable minerals such as gold, silver, copper, lithium, limestone, and more. Investors would be wise to identify metals and minerals that are crucial to the global economy, which should translate into sustained demand and higher profit margins for mining companies.

While the mining industry is cyclical, mined materials experience robust demand during periods of economic expansion, resulting in higher prices and profit margins. Here is one Canadian mining stock you can consider buying today.

An overview of Cameco Corp.

Valued at $23 billion by market cap, Cameco (TSX:CCO) is one of the largest global providers of uranium fuel. Its controlling ownership of the world’s largest high-grade reserves and low-cost operations, as well as investments across the nuclear fuel cycle, provides Cameco with a competitive moat.

Global utilities rely on Cameco to provide nuclear fuel solutions for the generation of carbon-free nuclear power. Cameco emphasized it is experiencing full-cycle growth due to unprecedented demand for nuclear energy.

Geopolitical tensions have meant governments are reevaluating energy security policies to reduce risk and eliminate reliance on unstable jurisdictions. Moreover, the transition towards clean energy sources is inevitable as countries fight climate change. In fact, 28 countries have signed an international declaration calling for a tripling of nuclear energy capacity by 2050.

What next for Cameco stock?

Cameco reported adjusted net earnings of US$339 million in 2023, up from US$135 million in the year-ago period. It ended 2023 with a healthy contract book and long-term commitments of 205 million pounds of uranium with 37 customers. The uranium miner stated these commitments account for 20% of its current reserve and resource base, providing Cameco with exposure to improving customer demand.

Cameco has a strong balance sheet and ended 2023 with US$567 million in cash, US$1.8 billion in total debt, and an undrawn credit facility of US$1 billion.

The company expects its enviable growth to continue in 2024 as it is positioned to realize the benefits of its investment in Westinghouse. Cameco has a 49% interest in Westinghouse and expects the investment to increase adjusted EBITDA between US$445 million and US$510 million in 2024. It expects EBITDA growth to range between 6% and 10% in the next five years.

Is Cameco stock undervalued?

Cameco stock has returned more than 300% to shareholders in the last five years, easily outpacing the broader markets. Currently, the TSX mining stock is priced at 47 times forward earnings, which might seem steep. However, analysts expect Cameco to increase adjusted earnings by 48% annually in the next five years.

This means analysts expect Cameco’s earnings per share to expand to US$4.20 in 2028. If Cameco stock is priced at 30 times earnings, it should rise to US$126 in the next four years, indicating an upside potential of over 150% from current levels.

Recently, investment bank Goldman Sachs initiated coverage on Cameco stock with a “buy” rating and price target of US$55. A report from The Fly suggests Goldman Sachs is bullish on Cameco due to the company’s leading market share and rising demand for uranium.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Cameco and Goldman Sachs Group. The Motley Fool has a disclosure policy.

More on Metals and Mining Stocks

STACKED COINS DEPICTING MONEY GROWTH
Stocks for Beginners

Got $200? 1 Copper Stock to Buy and Hold Forever

This copper stock is worth its weight in gold. Or actually, in copper! Given that the price of the material…

Read more »

A miner down a mine shaft
Metals and Mining Stocks

Lundin Stock Looks Like a Deal After Earnings

Lundin (TSX:LUN) stock fell slightly after earnings that were lower than the previous two quarters, yet copper demand remains high.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Metals and Mining Stocks

3 No-Brainer Copper Stocks to Buy With $200 Right Now

Are you looking for growth? These three copper stocks have been on a tear, with even more predicted in 2024…

Read more »

Target. Stand out from the crowd
Metals and Mining Stocks

3 No-Brainer Stocks to Buy Under $30

Lower-priced TSX stocks such as Air Canada, Kinross Gold, and Saputo trade at compelling valuations in 2024.

Read more »

growing plant shoots on stacked coins
Stocks for Beginners

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

If you're looking for growth, look for cheap stocks in the right sector. And these three Canadian stocks offer exactly…

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Energy Stocks

Cameco Stock and More: 3 TSX Commodity Titans to Watch in 2024

Cameco stock (TSX:CCO) has seen its share price surge this year, but there are also other commodity stocks I would…

Read more »

Metals and Mining Stocks

2 Sizzling Hot Stocks to Buy Right Now

Teck Resources and Agnico-Eagle Mines are two stocks that are soaring this year. Check out why they're likely to continue…

Read more »

Gold bullion on a chart
Energy Stocks

Have $500? 2 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

Torex Gold Resources (TSX:TXG) stock and one undervalued TSX energy stock could rise as identified scenarios play out.

Read more »