The Future of Uranium-Powered Energy with Caution

Uranium Energy

Uranium Energy (NYSEAMERICAN: UEC) is a uranium exploration company that is based in the U.S.

Operations are managed by professionals with decades of experience in their field while maintaining the largest database for historic uranium exploration projects.

So What’s The Benefit of Uranium-Powered Energy?

Clean energy initiatives have begun springing up around the world, at first glance you might recognize clean energy as just solar and wind, but it can also be nuclear. Nuclear releases zero emissions and is considered a clean energy source.

Power generation is from fission, the splitting of uranium atoms. The heat by-product is used to make steam which then rotates a turbine to generate power. Luckily, zero harmful chemicals pollute the atmosphere through this process.

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Another advantage is that nuclear energy requires less land compared to alternative zero-emission energy solutions. A nuclear facility that produces 1,000 megawatts of energy only requires just over a square mile. This is the equivalent of over 3 million solar panels, yes million, to produce the same amount of energy.

This is what makes uranium so valuable as it slowly gains popularity over time, which is what UEC wants to capitalize on.

Future Expectations

The expectation is that UEC can begin to generate income from these projects not currently in operation as they are not producing any income. It may be best to wait until signs of revenue begin to appear, as there’s not a clear roadmap of when this may be occurring. After all, increasing demand, prices, and renewable initiatives should not be the deciding factor of revenue. There should be at least some.

It looks as though UEC is currently acquiring land that may hold uranium reserves which they hope to capitalize on at some point in the future. These regions include Colorado, Arizona, Texas, and more southern states which have historically been a concentrated area for uranium mining.

It does seem as though that nuclear energy is becoming more prominent as clean energy solutions begin to power more of the world’s electrical grid over time. These reserves of uranium may be monumental money makers if they were to be used.

The Poor Fundamentals

As stated previously, UEC doesn’t seem to have any current operations that are generating revenue yet which is slightly disappointing.

For a company that’s been around for quite some time, revenue should be existent in their recent quarters. Although, they do have the reserves to potentially generate some income into their energy business.

Over time, shares have been issued at a fast pace. To give perspective, on October 9, 2015, UEC had just over 98.7 million shares outstanding. As of July 24, 2021, the total shares outstanding have reached over 233 million according to Yahoo Finance stock data.

Increasing amounts of shares dilute the current shareholders and devalue their shares significantly. This is also not a great sign in the long term unless the cash is being used for further expanding the business.

This indicates investors should be wary before investing, potentially waiting for revenues may be adequate to reduce the risk involved. This is primarily because UEC has not generated any income in multiple years consecutively since 2015.

Overall, it’s not entirely clear whether UEC will show revenue anytime soon, which is why it may be wise to stay on the sidelines for some time if you are waiting to get into a uranium stock play. There may be better opportunities out there to get exposure to this growing industry.

Closing Thoughts

UEC is a very risky play right now in the short term. It had good long term application but investors with low risk tolerance should shy away from a play like this in the short term. This company generates no revenue at the moment however it has application potential.

However a current trend starting to bubble online is the increasing demand for uranium and its many applications along with the coming  uranium “bull market”. Investors must be wary that markets are cyclical and there will be bulls and bear markets alike. Early investor will reap larger rewards if the trend catches momentum and rallies fast and hard, but they will also be the first to lose if markets stagnate and go no where.

A medium to long term investor could gain exposure to this stock through the use of a stock options strategy know as “Put Selling”. When selling puts, you obligate your self to be a purchaser of a stock at a predetermined strike price of your choosing. The benefit of this is you collect money upfront known as premium and you let time and volatility work in your favor.

This is not intended to be investment advice. As always do your own due diligence and invest based upon your own risk appetite and consult your own financial advisor for the right investment strategy for your specific needs.

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Andre Mitchell
Andre Mitchell

Andre Has been trading financial markets for 5+ years. Has consistently grown small account sizes to medium sizes. Andre is a long term income investor that primarily operates in the stock options market and loves sharing his insight and experience with people who love investing and growing their financial wealth.

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