Have you invested in Cameco (TSX: CCO)? Despite suffering from weak demand for a decade, Cameco’s business is finally picking up again. This begs the question as to whether Cameco stock is a good buy right now.
In fact, even in a market full of volatility, Cameco stock remains a great option to consider. Here’s why.
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Cameco: A good buy for any portfolio?
For those unfamiliar with the stock, Cameco is one of the largest uranium miners on the planet. Uranium is used as fuel in nuclear reactors, representing a clean, cheap and effective means to generate electricity.
Cameco not only mines that uranium but also provides it to customers across the globe through long-term contracts at set prices. This provides a predictable revenue stream for the company, which leaves room for growth.
That growth is important to note. Following a decade of depressed prices and little demand, nuclear power is now increasing in popularity. In fact, there are approximately 65 nuclear reactors under construction globally, and a further 90 reactors in various stages of planning.
The bulk of those new reactors are being built in Asian markets, predominately China and India, to meet growing demands. Collectivel,y those reactors provide nearly 10% of global energy needs.
For Cameco, this represents a massive opportunity to benefit from the insatiable demand for power.
Speaking of opportunities, prospective investors should note that over the past five years, the stock has surged a whopping 339%. That makes the stock one of the better-performing options on the market.
More importantly, despite those gains, there’s still plenty of upside for Cameco over the next several years.
That’s because Cameco generates a stable, recurring revenue stream thanks to its long-term contracts. The company also benefits directly from both the rising spot price of uranium as well as the flurry of new reactors coming online.
Anticipating that growth, Cameco has also moved to ramp up and restore its tier-one assets, including those that were shuttered several years ago when uranium prices bottomed out.
Specifically, Cameco’s McArthur River and Cigar Lake facilities are planned to produce 18 million pounds each this year.
In short, Cameco is a good buy right now.
Should you buy Cameco stock now?
Cameco has improved massively over the past several years. That being said, no stock, even the most defensive, is without some risk. In the case of Cameco, that risk is evident, given the volatile nature of uranium and nuclear reactors.
That’s also evident in Cameco’s improving financials. In the most recent quarter, the company posted adjusted net earnings of $157 million.
Fortunately, Cameco offers some defensive appeal to counter that volatility, mainly in the form of long-term contract pricing for its customers. That stable model is not unlike the appeal of investing in utility stocks.
In my opinion, Cameco represents a unique stock with plenty of long-term upside. Prospective investors with long-term horizons should consider adding a small position as part of a larger, well-diversified portfolio.
