Is it Too Late to Buy Cameco Stock?

Nuclear power station cooling tower

Investors have been going through a learning experience this year. There have been certain sectors seeing a surge in share price, and one area is related to renewable energy.

While not all renewable energy stocks are doing well, demand for the materials needed to support renewable energy continues to climb — and that includes uranium. Shares of Cameco (TSX:CCO) have climbed by 86% in the last year as of the time this article was written.

But is it now too late for investors? Let’s look at the factors that have driven up the share price in Cameco stock. Furthermore, what should investors consider if they’re looking for more growth?

What happened?

Cameco stock’s share price has been rising for a number of reasons. First off, the price of uranium has been rising in 2023 and 2024. This is due to a number of factors, including supply concerns and increasing demand from nuclear power plants.

The rising price has also meant Cameco stock has been able to sell more uranium at higher prices. This has boosted the company’s revenue and profitability. Yet, on a company level, Cameco stock has been investing. Its investment in Westinghouse Electric is starting to pay off. Westinghouse is a leading provider of nuclear reactor technology and services. This investment gives Cameco a stake in the growth of the nuclear power industry.

What to consider

All this is great, but how long can it last? There are more important factors to consider before diving into Cameco stock. For instance, consider the uranium market itself. Nuclear power generation drives demand, accounting for roughly 10% of global electricity. The World Nuclear Association forecasts demand growth, with a potential 51% increase by 2040, depending on new plant construction and retirements.

What’s more, current production is recovering from pandemic dips, but some analysts predict future shortfalls as existing resources dwindle and new mine development takes time. Geopolitical instability in major producing regions like Kazakhstan can also disrupt supply. As of now, a small number of countries dominate production, making the market vulnerable to political instability in those regions.

Given all this, Cameco is well-positioned for future growth, but it’s not without risks. The company’s success will depend on its ability to navigate the complex dynamics of the uranium market.

The fundamentals

We can see how well Cameco stock is holding up by looking at its fundamentals. This would mean diving into its most recent first-quarter earnings report. In this case, there are quite a few points investors should consider.

Cameco stock reported strong operational performance across its uranium, fuel services, and Westinghouse segments in the first quarter of 2024. Its financial results for the quarter are in line with its 2024 outlook and expectations. Despite reporting a net loss for the quarter, the company’s adjusted net earnings and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) show positive trends compared to the same period in the previous year.

Furthermore, Cameco stock’s uranium production increased in the first quarter, reflecting strong performance. The company continues to be selective in committing its uranium inventory and conversion capacity, focusing on long-term contracts to capture upside potential. What’s more, it maintains a strong balance sheet with cash reserves and a focused approach to debt reduction.

Bottom line

Cameco stock highlighted the growing support for nuclear energy, and that seems to continue. As debt is reduced and earnings increase, the company still looks like a strong operator in the uranium market. This should continue as the world shifts towards renewable nuclear assets.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Cameco. The Motley Fool has a disclosure policy.