In This Article:
- By GF Value
The stock of Cameco (NYSE:CCJ, 30-year Financials) appears to be significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $18.18 per share and the market cap of $7.2 billion, Cameco stock is estimated to be significantly overvalued. GF Value for Cameco is shown in the chart below.
Because Cameco is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
Link: These companies may deliever higher future returns at reduced risk.
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Cameco has a cash-to-debt ratio of 0.92, which is in the middle range of the companies in the industry of Other Energy Sources. The overall financial strength of Cameco is 5 out of 10, which indicates that the financial strength of Cameco is fair. This is the debt and cash of Cameco over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Cameco has been profitable 7 years over the past 10 years. During the past 12 months, the company had revenues of $1.4 billion and loss of $0.081 a share. Its operating margin of -2.24% in the middle range of the companies in the industry of Other Energy Sources. Overall, GuruFocus ranks Cameco's profitability as fair. This is the revenue and net income of Cameco over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Cameco's 3-year average revenue growth rate is worse than 69% of the companies in the industry of Other Energy Sources. Cameco's 3-year average EBITDA growth rate is 1.3%, which ranks in the middle range of the companies in the industry of Other Energy Sources.