Energy Fuels UUUU is trading at a forward price-to-sales ratio of 6.83, significantly higher than the non-ferrous mining industry’s 2.63. UUUU’s Value Score of F suggests that the stock is not so cheap and indicates a stretched valuation at this moment.
Zacks Investment Research
Image Source: Zacks Investment Research
Year to date, the UUUU stock has declined 28.3% against the industry’s 0.5% dip. The Zacks Basic Materials sector has slipped 11.8%, while the S&P 500 has risen 26.2% in the same timeframe.
Meanwhile, peers Cameco CCJ, Uranium Energy UEC and Centrus Energy LEU have gained 20.1%, 7.8% and 27.6%, respectively.
Energy Fuels Stock’s YTD Performance Vs Industry, Sector & S&P 500
Zacks Investment Research
Image Source: Zacks Investment Research
The UUUU stock is currently trading below its 200-day and 50-day moving averages, suggesting a bearish trend.
UUUU Shares Trade Below 50-Day & 200-Day SMAs
Zacks Investment Research
Image Source: Zacks Investment Research
Is the stock’s weakness a buying opportunity? It is important to examine the factors influencing the decline and assess the company’s investment potential.
Decoding Energy Fuels’ Decline
Decreasing Uranium Prices: Uranium prices have declined 22.7% year to date, hovering around $70 per pound, driven by expectations of increased supply. Kazatomprom, the world’s largest uranium producer, plans to boost production next year despite challenges in securing sulfuric acid. Western miners are also anticipated to raise output.
Reduced 2024 Outlook Due to Pinyon Concerns: UUUU paused ore shipments from its Pinyon mine in Arizona following concerns raised by the Navajo Nation about transporting radioactive materials through their lands. Mining has continued at Pinyon, with the mined ore stockpiled at the site.
Factoring this setback, Energy Fuels expects to produce 150,000-200,000 pounds of finished uranium in 2024, lower than the prior stated 150,000-500,000 pounds.
With no contract sales scheduled for the fourth quarter of 2024, UUUU stated that it would look for opportunities to sell uranium on the spot market to take advantage of any price increase. However, considering the weakness in prices, we do not expect any sales to have taken place in the fourth quarter.
Factors That Work in Favor of UUUU
Recent Acquisitions Highlight Energy Fuels’ Diversification Efforts
Base Resources to Boost REE Production: In October, UUUU acquired Base Resources Limited, gaining access to its Toliara Mineral Sand Project. Energy Fuels aims to become a leading global producer of rare earth elements (REE), which are essential in various clean energy technologies. This move will also strengthen UUUU’s potential to become a major producer of titanium and zirconium minerals.
The Toliara Mineral Sand Project complements Energy Fuels’ Bahia Mineral Sand Project in Brazil and 49% stake in the Donald Mineral Sand Project in Australia. With this move, UUUU ensures a long-term supply of monazite that can be processed to produce advanced REE materials at its White Mesa Mill, a cost-effective and capital-efficient strategy. Earlier this month, the Madagascar government lifted the suspension on the Toliara project (which had been in place since November 2019) and UUUU can now develop this project.
RadTran to Capitalize on Isotope Shortage: Targeted alpha therapy is showing great promise in clinical trials for cancer treatment. It requires certain isotopes (Ra-226 and Ra-228) that are scarce in supply. To address this issue, Energy Fuels recently acquired RadTran LLC to use its know-how to recover these isotopes from its process streams at the White Mesa Mill.
UUUU Continues to Focus on Boosting Uranium Capacity
Energy Fuels has four long-term contracts with major U.S. nuclear utilities that require deliveries of base quantities of 2.8 million pounds of uranium from 2025 to 2030.
The company is preparing two additional mines in Colorado and Wyoming (Whirlwind and Nichols Ranch), which could increase uranium production to a run rate of more than two million pounds per year as early as 2026. UUUU is advancing several other large-scale U.S. mine projects to raise the capacity to 5 million pounds annually to bet on the robust uranium market conditions.
Energy Fuels Boasts Debt-Free Balance Sheet
As of Sept. 30, 2024, UUUU had $183.2 million of working capital, including $47.46 million in cash and cash equivalents, $101.15 million in marketable securities (interest-bearing securities and uranium stocks), $35.91 million of inventory, and no debt. This is commendable compared with the industry’s debt-to-capital ratio of 18%.
UUUU Poised to Deliver Profits in 2025
The Zacks Consensus Estimate for Energy Fuel’s 2024 earnings has seen upward revisions over the past 60 days. However, the estimate for 2025 has moved south at the same time.
Zacks Investment Research
Image Source: Zacks Investment Research
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
The estimate for 2024 is pegged at a loss of 10 cents, suggesting a slight improvement from the loss of 12 cents incurred in 2023. The expectation of lower sales amid a weak backdrop for uranium prices will likely lead to a full-year loss for UUUU in 2024.
However, the picture for the next year holds promise. Earnings estimates for 2025 are pegged at 7 cents, which indicate that analysts expect the company to deliver its first year of profit since it started trading on the NYSE in December 2013.
Zacks Investment Research
Image Source: Zacks Investment Research
Average Target Price for Energy Fuels Suggests Solid Upside
Based on short-term price targets offered by four analysts, the average price target is $8.75 per share. The average suggests a 68.3% upside from Friday’s closing price.
Zacks Investment Research
Image Source: Zacks Investment Research
Should You Buy UUUU Stock Now?
Energy Fuels seems ready to deliver its first year of profit in 2025. Backed by its debt-free balance sheet, the company is advancing with its growth plans to capitalize on the expected surge in uranium and REE demand. Those who already own the stock may stay invested, given UUUU’s solid long-term prospects in the uranium and REE markets.
Considering its premium valuation and shipment issues at Pinyon, new investors should monitor Energy Fuels’ developments for a more appropriate entry point. The stock’s Zacks Rank #3 (Hold) supports our thesis.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
