Cameco's Q4 Earnings Beat Masks Underlying Valuation Risks

What happened

Cameco reported a 38% jump in Q4 EPS, driven by strong Fuel Services and Westinghouse growth, with expanding long-term contracts cited to enhance future visibility. However, the DeepValue report cautions that at $113.63, the stock embeds optimistic assumptions about a sustained uranium upcycle and Westinghouse policy optionality not yet proven in filings. Critical to the investment case is whether Cameco can maintain delivery economics without escalating purchase costs, as seen in Q3 2025 with purchases at $82.51 per pound and product loan reliance. The earnings beat may fuel momentum, but it does not address core concerns about valuation multiples like a P/E of 128.8 and EV/EBITDA of 85.9, which leave little room for disappointment. Investors should look beyond the propaganda to upcoming quarterly data on sourcing costs and conversion throughput for real evidence of sustainable growth.

Implication

For investors, the positive Q4 results may drive short-term enthusiasm, but caution is warranted as the DeepValue report identifies critical gaps. CCJ's high valuation assumes sustained delivery reliability and Westinghouse benefits that lack substantive evidence from filings, making the stock vulnerable to multiple compression. Key monitoring points include whether purchase volumes in Q1 2026 exceed 2M lbs per quarter at costs above $82.51/lb, which would signal margin pressure. Additionally, Fuel Services conversion output must hold at 13-14M kgU to support earnings, and any decline could undermine growth projections. Without proof of these fundamentals, the 'WAIT' rating remains prudent, suggesting investors await clearer data rather than chase momentum.

Thesis delta

The Q4 earnings beat does not alter the DeepValue thesis, which remains focused on waiting for proof of delivery economics amidst high valuation. No shift occurs until data on purchase costs and product loan reliance in Q1 2026 confirms or refutes the sustainability of growth. Investors should maintain a cautious stance, as the announcement lacks details on sourcing strategies critical to margin preservation.