Cameco, listed on the New York Stock Exchange as CCJ, operates as a supplier to the nuclear power industry, producing and processing uranium into fuel for nuclear plants. The company also provides services through its 50% acquisition of Westinghouse, which adds a consistent revenue stream to its portfolio.
Uranium mining and processing, the core of Cameco's business, is commodity-driven and historically volatile. Long-term contracts help limit some volatility, but large price swings, such as those following the 2011 Fukushima accident in Japan, can impact earnings. Currently, nuclear power is in high demand, and uranium prices have recovered from post-Fukushima lows.
Investors considering Cameco must assess their tolerance for volatility tied to uranium prices. If willing to accept this, they should evaluate the stock's valuation. Cameco's price-to-sales ratio is around 20, compared to a five-year average of 8, indicating a premium. Its price-to-earnings ratio is 130, and its price-to-book value is 10 versus a five-year average of 3, suggesting high valuations.
Despite being a well-run company with reduced volatility from the Westinghouse addition, Cameco's stock appears to have priced in much of the positive news around nuclear power's resurgence. The Motley Fool Stock Advisor analyst team identified 10 best stocks for investors, excluding Cameco, citing potential for high returns from other picks like Netflix and Nvidia. Stock Advisor's total average return is 955%, outperforming the S&P 500's 196%.
Investors must weigh trade-offs, as Cameco's current price may seem lofty for many, reflecting Wall Street's premium pricing amid the nuclear power revival. Reuben Gregg Brewer holds no positions in mentioned stocks, while The Motley Fool holds positions in Cameco.