Editor's Note: This article contains analysis of micro cap stocks. Caveat emptor.
Over the last three months we have been keeping records on analysts' price targets for uranium mining and development companies. A month ago we reported our observations for the first time, and in this article we would like to provide our monthly update.
As in the previous offering we will be considering the following companies in alphabetical order: Cameco (NYSE:CCJ), Denison Mines (NYSEMKT:DNN), Uranerz (NYSEMKT:URZ), Uranium Energy (NYSEMKT:UEC), Uranium Resources (NASDAQ:URRE) and Ur-Energy (NYSEMKT:URG). Our data for these stocks is summarized in the table below. The first three columns list the company name, ticker symbol and share price at the time of writing. Price targets (low, median and high) are listed in the following three columns. These targets are followed by a column giving the number of analysts providing data and the mean recommendation given by these analysts ranging from 1.0 (strong buy) to 5.0 (sell). This concludes the data sourced directly from Yahoo.com.
The following columns are colored in light green and contain data given in percentages related to the share price at the time of writing as documented in the third column. The column titled "median-price" gives the difference between the share price and the median target price. The column titled "high-low" gives the difference between the high and the low target. The last four columns titled "target change" document the changes in price targets since the May report with the last columns giving the average change over the low, median and high price targets.
Note: Denison Mines and Uranium Resources are only covered by one single analyst, and Ur-Energy by two.
We are especially interested in the following three measures documented in the table above:
- Column "median-price" indicates the potential of the stock as far as analyst targets are concerned.
- Column "high-low" measures the divergence in analyst opinions.
- Column "target change average" gives a measurement for the change in targets during the past month.
The results for these three columns are visualized in the three diagrams below.
Uranerz is trading at around half of the median price target and therefore seems to have the greatest growth potential out of the stocks considered for this study. At the same time, Uranerz has the greatest spread between high and low target indicating some disagreement in analyst expectations. On average targets for Uranerz have been cut a fraction during the past month. Uranerz is a development stage mining company preparing for production later in the year. At that stage companies are at their most vulnerable. Analysts obviously weigh the risks and rewards for Uranerz differently. At 1.6 the analyst recommendation is quite bullish for Uranerz.
Ur-Energy is in a similar situation as Uranerz above and similar characteristics can be observed when monitoring analysts' targets. Ur-Energy trades well below the median target and the spread between high and low target is relatively high. Targets have been lifted significantly during the past month indicating a bullish tendency. Ur-Energy gets a 1.5 recommendation from analysts which is the most bullish in this group of stocks.
Targets for Uranium Energy have also been lifted in recent weeks. The company is trading just below the median target price and analysts recommendation is given as 1.8 which an improvement from last month's 2.0.
Hardly any changes have been recorded for Cameco during the past month. The share price has been holding up stronger than we anticipated and our hopes of picking up a position at a $16-handle have not eventuated just yet. The company has 20% upside until hitting the median price target.
Denison Mines is the only company out of the group considered for this article trading above the price target (there is only one analyst) which could be considered bearish, especially since this price target has been lowered slightly during the past month and the recommendation is pegged at 2.8.
Uranium Resources has 29.6% to go until it reaches the only price target provided for this company. This target has remained unchanged for the duration of our coverage.
Our pick of the month: Uranerz and Ur-Energy offer considerable growth potential and might be of interest for investors with adequate risk tolerance. This article might just provide a starting point for further research.
Disclosure: I am long URZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.