Although it’s a controversial issue for obvious reasons, investors may nevertheless want to consider loading up on uranium stocks. For one thing, nuclear energy appears to be making a comeback.
According to a recent Reuters report, demand for uranium reactors may jump by 28% by 2030. Ten years later, this stat might nearly double as governments accelerate their nuclear energy capacities to meet zero-carbon targets. That’s right, the underlying industry for all its drama represents a clean energy source, at least from an emissions sense.
Second, a societal shift may be occurring as well. According to a Pew Research Center report, a growing share of Americans favor more nuclear power. Further, this rising trend is evident among both Democrats and Republicans. Finally, it’s something we can all agree on. With that, below are uranium stocks to buy based on the nuclear energy resurgence.
NexGen Energy (NXE)
Based in Vancouver, British Columbia, Canada, NexGen Energy (NYSE:NXE) at first glance appears to be a pure renewable energy specialist, what with the aerial photographs of deep-green forests and nature scenes and all. However, dig through the word salad of social and environmental benefits and you realize you’re looking at a global leader for uranium-responsible delivery.
In my opinion, NexGen doesn’t need to obfuscate its business. Investors know what the company does and they like what they see. Since the start of the year, NXE shot up over 30%, making it one of the top-performing uranium stocks.
To be fair, NexGen’s financials aren’t exactly sterling. More importantly, the company is an aspirational one, currently printing no revenue. Still, with rising interest in nuclear energy, NXE could entice certain speculators. Turning to Wall Street, analysts peg NXE as a unanimous strong buy. Their average price target lands at $6.41, implying nearly 13% upside potential.
BHP Group (BHP)
Though not a direct player among uranium stocks, BHP Group (NYSE:BHP) deserves recognition. To be quite blunt, targeting pure-play nuclear energy ideas carries significant risks. One of the most pressing is that the uranium specialists ply their trade in a capital-intensive industry. As well, it could be many years before the investments in uranium projects pan out.
With BHP, investors are dealing with a known entity with a generally predictable business. In this case, the company prints a three-year revenue growth rate of 12.4%, better than 52.3% of its peers. Even more impressive, the metals and mining firm posts robust profitability figures. For example, its operating margin comes in at 40.8%, better than 93.24% of sector rivals.
As a bonus, BHP trades at only 11.54x trailing earnings. In contrast, the sector median stat is a loftier 15.03x. Looking to the Street, analysts peg BHP as a moderate buy with a $70.80 price target, implying over 25% upside potential.
Denison Mines (DNN)
An incredibly risky idea among uranium stocks, Denison Mines (NYSEAMERICAN:DNN) recently closed at $1.44 per share. Given that it’s barely above literal penny stock status, prospective investors need to be extremely cautious with DNN. Still, speculators enjoy targeting this nuclear energy idea for its mobility. Since the January opener, shares gained nearly 30% of its equity value.
Now, before you jump into Denison Mines, you should be aware that it has rough financials. Worryingly, the company’s three-year revenue growth rate sits at 8.4% below breakeven. As well, its free cash flow “growth” during the same period also sits in negative territory. Unfortunately, Denison’s trailing-year profit margins failed to find an exemption from the red ink.
However, it’s also fair to point out that the company sits on a cash-to-debt ratio of nearly 107X, above 73.84% of its peers. Moreover, Denison’s Altman Z-Score comes in at 8.91, indicating a very low risk of bankruptcy. Finally, analysts peg DNN as a strong buy with a $1.99 price target, implying over 36% upside potential.