Up 35%, Is Cameco Stock a Buy in June 2024?

When a stock is bullish, and you have missed the starting point of the trend, it can be challenging to identify the right time to buy the stock.

| More on:
Nuclear power station cooling tower

Source: Getty Images

The global “attitude” about different energy sources has changed a lot in the last few years as the world pushes towards a greener future. It’s clear that despite their potential, we are a long way from relying solely on renewables for the world’s power needs.

This is encouraging the world to look for a “transitional” power source between fossil fuels and a fully renewable-based future, and nuclear power is the most viable solution.

According to the World Nuclear Association, there are about 440 nuclear plants operational worldwide (32 countries), 60 more under construction, and 110 more planned for the future.

With nuclear power seeing a large-scale revival, the importance and value of uranium producers like Cameco (TSX:CCO) have gone up considerably. Uranium stocks are also being considered solid picks from an ESG (environmental, social, and governance) investing perspective, though that’s a debatable stance.

The company

Canada has long been the second-largest uranium-producing country in the world, behind Kazakhstan, which is the largest producer by a significant margin. The bulk of Canadian uranium production (over 75% in 2022) comes from Cameco.

In 2022, Cameco alone was responsible for 12% of the global uranium output. It is also the largest publicly traded uranium producer in the world, as the only company that supersedes it in annual uranium production is state-owned.

The company has an impressive portfolio of uranium-producing properties/assets around the globe, including one in Kazakhstan, where Cameco has a 40% ownership stake.

It also has a considerable ownership or operator stake in three Canadian and three Australian uranium production assets. It also has the world’s largest uranium refinery in Canada.

The stock

Even though Cameco is technically counted among Canadian energy stocks, it shares almost no performance pattern with the energy sector, and its revenues and investor sentiment rely heavily on uranium demand (existing and future).

Uranium prices started rising sharply after the first quarter of 2023, and this pricing growth augmented an already bullish Cameco stock. As a result, the stock rose by about 455% in the last five years. The growth pace has slowed, but it’s still impressive at 35% since the beginning of this year.

Many of the core strengths of Cameco still stand and may even get enhanced if the company ramps up its uranium production to meet the global demand. New orders, an increase in the number of nuclear reactors coming online, and expedited construction of the ones currently being built may also increase the company’s perceived value.

Foolish takeaway

The question is whether Cameco is still worth buying, considering the slowdown of the growth momentum, leveling of uranium prices, and the stock’s overvaluation represented by a price-to-earnings ratio of 140. While it’s true that the current momentum may keep carrying the stock up for weeks or months yet, a safer approach might be to wait a bit before buying Cameco.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Cameco. The Motley Fool has a disclosure policy.

More on Energy Stocks

Pumpjack in Alberta Canada
Energy Stocks

Is Imperial Oil Stock a Buy, Sell, or Hold for 2025?

Imperial Oil stock is in a precarious position, so what should investors consider as we head nearer to 2025?

Read more »

construction workers talk on the job site
Energy Stocks

Is Suncor Stock a Buy, Sell, or Hold for 2025?

Suncor Energy stock is trading at its decade-high on uncertainty in the oil market. Should you buy, sell, or hold…

Read more »

four people hold happy emoji masks
Energy Stocks

If You Like Exxon Mobil, Then You’ll Love These High-Yield Oil Stocks 

Here are three high-yield oil stocks with the potential to outperform over the medium to long-term.

Read more »

bulb idea thinking
Energy Stocks

2 No-Brainer Utility Stocks to Buy Now for Under $1,000

Canadian Utilities (TSX:CU) is a utility stock that may be worth a look in late 2024.

Read more »

dividend growth for passive income
Energy Stocks

Enbridge Stock: Buy, Sell, or Hold?

With a dividend yield of 6.4% and strong long-term growth profile, let's take a look at the investment case for…

Read more »

construction workers talk on the job site
Energy Stocks

Mattr Stock: Why Now Is the Time to Buy This Undervalued Gem

A top but undervalued growth stock is a buying opportunity today.

Read more »

sources of renewable energy
Dividend Stocks

Want Passive Income? This 5.4% Dividend Stock Pays Cash Every Month

This dividend stock doesn't just have a strong monthly dividend -- it also has an excellent future outlook.

Read more »

oil pump jack under night sky
Energy Stocks

Is Baytex Energy Stock a Good Buy?

Baytex Energy is a beaten-down TSX Energy stock that trades at a reasonable valuation in October 2024.

Read more »