The COVID-19-pandemic-induced halt in the construction of new plants, a series of mine closures in Canada and dwindling secondary supplies fueled a spike in U308 prices in May 2020. However, as of March 31, 2021, the uranium spot price has declined 15.5% to $28.33 since May 31, 2020. With uranium companies reopening their primary mines, there could be a significant improvement in supply conditions this year. As such, uranium prices may slide further in the coming months.
However, with President Biden’s push to reduce carbon emissions and recent failures of traditional green-energy power systems driving investment in new nuclear plants, the uranium shortage seems less likely to occur. Hence, we think the short-term outlook for the metal is uncertain.
This year is expected to witness a reversal of 2020's gains as COVID-19 production issues end and supply returns to normal without a significant increase in demand. Against this backdrop, shares of The Cameco Corporation (CCJ), NexGen Energy Ltd. (NXE), Denison Mines Corp. (DNN), and Energy Fuels Inc. (UUUU) could experience a pullback. So, these stocks should be avoided now.
Cameco Corporation (CCJ)
Incorporated in 1987, CCJ is a producer and seller of uranium. It operates in two segments, Uranium and Fuel Services. Cameco's Canadian uranium joint operation interests include McArthur River, Key Lake and Cigar Lake. It sells its uranium and fuel services to nuclear utilities in the United States, Europe, and Asia.
In March, CCJ sold an aggregate five million common shares of UEX Corporation (UEX) at approximately $0.30 per common share, yielding $1.50 million in proceeds. UEX’s expansion plans were not benefitting CCJ, which led to its decision to reduce its position in the company. We believe this divestment could negatively impact the stock’s performance in the near term.
CCJ’s revenue declined 16.2% year-over-year to $290 million in the first quarter, ended March 31. The company reported a $40 million gross loss, compared to a $35 million gross profit in the prior-year quarter. Also, its net loss was $5 million over this period. It reported a $0.01 loss per share.
The consensus revenue for the fiscal period ending December 2021 represents a 10% decline year-over-year to $1.27 billion.
CCJ’s POWR Ratings are consistent with this uncertain outlook. The stock has an overall C rating, which translates to Neutral in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CCJ is also rated a D in Growth, Value and Stability. Within the D-rated Industrial – Metals group, it is ranked #6 of 15 stocks.
To see additional POWR Ratings for Momentum, Sentiment and Quality for CCJ, Click here.
NexGen Energy Ltd. (NXE)
NXE is a British Columbia corporation with a focus on the acquisition, exploration and development of Canadian uranium projects. It is a well-funded company with a portfolio of high-impact projects across the Athabasca Basin. Its principal asset is the Rook I project that consists of 32 contiguous mineral claims totaling an area of 35,065 hectares.
In March, NXE exercised a $22.5 million over-allotment option, in connection with the company's recently completed underwritten public offering of 33.4 million common shares. It plans to use the net proceeds from the offering for general working capital and other corporate purposes.
The stock appears to be trading at a premium valuation. NEX’s trailing-12-month Price/Book value currently stands at 6.96x, 313.2% higher than the 1.68x industry average.
In the fiscal first quarter, ended March 31, 2020, NXE reported a net loss of CAD $68.12 million ($56.37 million), representing a significant increase from the year-ago value of CAD $10.39 million ($8.60 million). The company’s expenses came in at CAD $7.02 million ($5.81 million), representing a 52.3% increase year-over-year. Its loss per share came in at CAD $0.17 ($0.14) over this period.
NXE’s poor prospects are also apparent in its POWR Ratings. The stock has an overall D rating, which equates to Sell in our proprietary rating system.
It also has an F grade for Value and Quality, and a D grade for Growth. Click here to see the additional POWR Ratings for NXE (Momentum, Stability and Sentiment).
Among the 53 stocks in the F-rated Miners - Diversified industry, it is ranked #39.
Denison Mines Corp. (DNN)
Formerly known as International Uranium Corporation, DNN operates as a uranium exploration and development company in Canada. Its flagship project is the 90% interest owned Wheeler River Uranium project located in the Athabasca Basin region in northern Saskatchewan. Denison is also the manager of Uranium Participation Corporation, a publicly traded company listed on the TSX under the symbol 'U', which invests in uranium oxide in concentrates ('U3O8') and uranium hexafluoride ('UF6').
In April 2021, DNN revealed the termination of its Management Services Agreement (MSA) with Uranium Participation Corp. This is not a good sign for the company because it will lead to an end of its involvement in UPC and its contribution to its unique strategies.
DNN’s revenue has declined 154% year-over-year to a value of CAD $2.50 million ($2.07 million). The company reported a net loss of CAD $8.88 million ($7.35 million) over this period. Its net loss per share remained unchanged year-over-year and came in at a negative CAD $0.01 ($0.0083).
The company reported a $10.30 million consensus revenue estimate for the year ending December 2021, indicating a 10.0% decline year-over-year. DNN’s stock has declined 0.8% over the past one month.
DNN’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating , which equates to Strong Sell in our POWR Ratings system. DNN has an F grade for Value and Quality, and a D grade for Sentiment and Stability. It is ranked #8 in the Miners - Diversified industry.
We have also graded DNN for Growth and Momentum. Click here to see them.
Energy Fuels Inc. (UUUU)
Formerly known as Volcanic Metals Exploration Inc., UUUU is the leading U.S. producer of uranium. It is also a major U.S. producer of vanadium and an emerging player in the commercial rare earth business where it’s working to help re-establish a fully integrated U.S. supply chain. The company owns and operates the Nichols Ranch project, the Jane Dough property, and the Hank project located in Wyoming, the Alta Mesa project located in Texas, as well as White Mesa Mill in Utah.
UUUU’s forward EV/Sales currently stands at 85.48x, 3181.2% higher than the 2.61x industry average . Its 106.01x forward Price/Sales is 6702.8% higher than the1.56x industry average.
The company’s revenue has decreased 71.7% year-over-year to $1.66 million for the year ended December 31. Its net loss came in at a negative $27.87 million, while its operating loss came in at a negative $24.63 million over the same period. UUUU reported a $0.23 net loss per share as compared to a $0.40 loss a year ago.
UUUU’s bleak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, which equates to Sell in our POWR Ratings system. UUUU has an F grade for Value and Stability, and a D grade for Sentiment and Quality. The stock is ranked #13 in the Industrial – Metals group.
Click here to see the additional POWR Ratings for UUUU. (Momentum and Growth).
CCJ shares were trading at $20.11 per share on Monday afternoon, up $0.03 (+0.15%). Year-to-date, CCJ has gained 50.07%, versus a 13.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Samiksha Agarwal
Samiksha Agarwal has always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market.
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