Fission Uranium Corp (TSX:FCU), an energy company based in Canada, saw significant share price volatility over the past couple of months on the TSX, rising to the highs of CA$0.69 and falling to the lows of CA$0.56. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether FCU’s current trading price of CA$0.58 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at FCU’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for FCU
What’s the opportunity in FCU?The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that FCU’s ratio of 0.8x is trading slightly below its industry peers’ ratio of 1.5x, which means if you buy FCU today, you’d be paying a relatively reasonable price for it. And if you believe that FCU should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that FCU’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from FCU?Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at FCU future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for FCU, at least in the near future.
What this means for you:
Are you a shareholder? FCU seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on FCU, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on FCU for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on FCU should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Fission Uranium. You can find everything you need to know about FCU in the latest infographic research report. If you are no longer interested in Fission Uranium, you can use our free platform to see my list of over 50 other stocks with a high growth potential.