It is interesting to note that when financial reports show a remarkable increase that is utterly due to unrepeatable events there is little said about what a poor indicator those reports will be of future performance. However, Cameco's president has said it well about how the problems they've had this quarter are a poor indicator of how their company will ultimately perform.
"Since Cameco's quarterly results vary significantly, comparing today's results to a remarkably strong first quarter last year is a poor indicator of future performance," said Jerry Grandey, Cameco's president and CEO."
EPS was 17c this quarter, about half compared to last year. It appears that Mr Grandey is suggesting earnings for the year should be in the $1.25-$1.50 range, but I haven't looked closely enough to really understand what he said with, "We expect our consolidated annual revenue to grow by nearly 50 per cent in 2007."
Cameco is in a position to really take advantage of the uranium bull when they get their flooded mine operational again. Whether that bull has the potential to meet their premium price of $52.58/share right now would require a careful analysis of their operations. Their price has jumped from about $36/share, 46%, last fall when I first looked at Cameco when their mine flooded. That is creation of about $6 billion of market cap. Revenues for Q1 2006 to Q1 2007 fell from $542 million to $409 million. Over a year it works out to about $2 billion in revenue for an $18.4 billion, without dilution, market cap company.
Uranium has definitely moved into bubble valuations for many companies, and many will plummet taking investors life saving with them. Right now it appears there is a lot of future valuation built into Cameco.
It would really require careful analysis to evaluate Cameco's potential. Because they are a producer, they are morely likely to actually make a lot of money on the uranium bull, however, supporting a market cap of $18.4 billion is a pretty tall order. Uranium is different from many other metals in that the approval process to build a new mine takes a lot more time, so it is likely it will take a long time for supply to balance out with demand, giving producers an incredible opportunity to make a lot of money. However, an unsustainable amount of money has poured into uranium stocks.
Tread carefully with this one and do some serious homework. $18.4 billion is a lot of market cap to support. It is likely 2008 earnings will go up as well, but this one is being valued at a P/E of 70 today. Catching up is a tall order.