Weekly Valuation – Valutico | July 7, 2023
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About the company
Cameco Corporation, based in Canada, is one of the world’s largest uranium producers, accounting for about 9% of global production. Since its founding in 1988, it has become a major player in the nuclear energy sector, with significant mining operations in Canada and the US, and interests in Central Asia and Australia. In addition to uranium mining, Cameco offers refining, conversion, and fuel manufacturing services, providing a comprehensive fuel cycle for nuclear energy.
The U.S. Senate Environment and Public Works Committee approved a bill aimed at expediting the deployment of advanced nuclear reactors. The bill urges the U.S. Nuclear Regulatory Commission to streamline its licensing processes, facilitate international collaboration on nuclear power, and support foreign nuclear safety training. This could benefit uranium miners like Cameco, given the potential increased demand for uranium.
Recent Financial Performance
For this year’s first quarter, Cameco reported a substantial rise in net income, nearly tripling from USD 40 million during 2022’s initial quarter to the current USD 119 million. Simultaneously, revenues saw a 73% jump to USD 687 million over the same period. A key driving force behind this surge in revenue was an escalation in uranium sales, which grew from 5.9 million pounds in the first quarter of 2022 to 9.7 million pounds in the recent quarter.
Share Price Performance
As of June 22, 2023, Cameco’s closing stock price stands at USD 31.76 compared to an all-time high of USD 44.87 in 2007. The stock’s 52-week high is USD 33.00, just 6.9% above the current price, and its low is USD 20.34, significantly lower by 34.1%. The average stock price over the past year was approximately USD 25.74, indicating an increase in recent times.The company current share price stands at USD 31.33.
We analyzed Cameco Corporation by using the Discounted Cash Flow method, specifically our DCF WACC simplified approach, as well as a Trading Comparables analysis. The Discounted Cash Flow analysis produced a value of CAD 14.7 billion using a WACC of 8.8%.
The Trading Comparables analysis resulted in a valuation range of CAD 6.4 billion to CAD 28.1 billion by applying the observed trading multiples EV/Sales, EV/EBITDA, EV/EBIT, P/E and P/B. For our Trading Comparables we selected similar peers such as Uranium Energy Corp, Centrus Energy Corp. and Peninsula Energy Limited.
Combining our DCF WACC and Trading Comparables analysis results in a valuation range of CAD 10.1 billion to CAD 19 billion. In comparison to Cameco market capitalization of CAD 18.3 billion we suggest that the company is fairly valued.
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This article is for informational purposes only and does not constitute investment advice. None of the information contained herein constitutes a solicitation, offer or recommendation to sell or buy any financial instrument.