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This Stock Is Miles Ahead of Its Industry: Is It a Buy Now?

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Written by Amy Legate-Wolfe at The Motley Fool Canada

When it comes to the future of investing, it’s important to look beyond the big winners of today. Long-term growth is always the goal, so finding sectors that offer that growth is certainly one of the biggest points to consider.

However, that doesn’t mean you won’t find companies that offer high growth as well. In fact, there are some high-growing stocks that also provide future growth opportunities.

That’s why today we’re going to look at Cameco (TSX:CCO), a stock that is absolutely miles ahead of its industry. Let’s now look at why, and what investors could keep looking forward to.

Leading position

The biggest benefit that Cameco stock has is that it’s the leader in the uranium mining industry. Cameco stock is the world’s largest commercial uranium producer. This gives it a significant advantage in terms of economies of scale, as well as market influence.

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Especially given the continued demand for uranium. The price of uranium has been increasing due to growing demand for nuclear energy, which is seen as a cleaner alternative to fossil fuels. Countries are investing in nuclear power to meet their climate goals, boosting demand for uranium.

That puts Cameco stock in a strong position. There have been supply disruptions and a general lack of investment in new uranium mines over the past decade. This has tightened the supply-demand balance, benefiting established producers like Cameco.

Strategy

Yet beyond just the demand for uranium, Cameco stock has been performing well in other areas as well. Cameco stock operates some of the lowest-cost uranium mines in the world, such as the Cigar Lake mine in Canada. This allows Cameco to remain profitable even when uranium prices are low.

Furthermore, Cameco has secured long-term contracts with fixed prices, providing revenue stability and shielding the company from short-term market fluctuations. This reliability has provided the company with solid financial strength.

Cameco stock maintains a robust financial position with substantial cash reserves and manageable debt levels, allowing it to weather market volatility and invest in growth opportunities. In fact, the company’s ability to pay dividends makes it attractive to income-focused investors, contributing to its stock performance.

Increasing demand

While shares of Cameco stock have surged, up 94% in the last year alone, far more growth is likely on the way. Governments worldwide are prioritizing low-carbon energy sources to combat climate change. Nuclear power, which produces minimal greenhouse gas emissions, is a critical component of this strategy.

Plus, numerous countries, particularly in Asia (e.g., China and India), are constructing new nuclear reactors. This will drive demand for uranium fuel. Add to this that many existing nuclear reactors are undergoing life extension programs, which will maintain or increase uranium demand.

And while there are other countries offering uranium, Western countries are seeking out countries that are far more stable. As geopolitical tensions rise, Canada offers a well-positioned country for secure and reliable uranium supplies.

Bottom line

Cameco stock may have risen higher in share price, but more is likely on the way. Its advantageous position in a tightening uranium market, strategic long-term contracts, low-cost production capabilities, strong financial health, and favourable market sentiment towards nuclear energy put it miles ahead.

Furthermore, Cameco stock’s future growth opportunities are underpinned by the rising global demand for nuclear energy, technological advancements, supply chain security, potential expansion of production capabilities, favourable market dynamics, strong financial health, and strategic exploration initiatives.

These factors collectively position Cameco for sustained long-term growth, making it an attractive investment for those looking to capitalize on the evolving energy landscape.

The post This Stock Is Miles Ahead of Its Industry: Is It a Buy Now? appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Cameco. The Motley Fool has a disclosure policy.

2024