TAC  Transalta Corporation

Exchange

NYSE

Sector

Public Utilities

Industry

Electric Utilities: Central

Market Cap.

1.63B

Vuru Grade

41.50/100

Current Price

$5.65
+0.05 (+0.89%)

Growth Price

$20.15
Undervalued by 256.72%

Company Metrics

  • P/E 40.36
  • P/S 0.91
  • P/B 0.85
  • EPS 0.14
  • Cash ROIC 1.13%
  • Cash Ratio 0.25
  • Dividend 0.12 / 2.17 %
  • Avg. Vol. 42,930.00
  • Shares 288.50M
  • Market Cap. 1.63B

Company Description

TransAlta Corporation operates as a non-regulated electricity generation and energy marketing company. The company engages in the production and sale of electric energy through its diversified portfolio of facilities fuelled by coal, natural gas, hydroelectric, wind, geothermal, and biomass resources in Canada, the United States, and Australia. It has an aggregate net ownership interest of approxi... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Contrarian Investors: Should You Buy TransAlta Corporation Today?
The Motley Fool Canada - May 23, 2017
In early 2012, TransAlta traded for more than $20 per share and paid out a quarterly dividend of $0.29. Today, the distribution is just $0.04 per share, and investors can pick up the stock for less than $8.
TransAlta Co. (TA) Receives "Hold" Rating from TD Securities - The Cerbat Gem
TOday's Movers: Transalta Corp (TSE:TA) Stock Rating Reiterated by BMO Capital ... - Weekly Register
TransAlta Corporation: Is it Time to Buy?
The Motley Fool Canada - Apr 24, 2017
TransAlta just announced plans to fast-track the company's transition to gas and renewables power generation. The firm says it will retire its coal-fired Sundance 1 plant effective January 1, 2018 and mothball the Sundance 2 plant the same day for a ...
TransAlta Corporation: Time to Buy This Stock?
The Motley Fool Canada - Nov 24, 2016
TransAlta Corporation (TSX:TA)(NYSE:TAC) has been in a downtrend for the past eight years, but better days might finally be on the horizon.
TransAlta moving ahead with hydro project after deal on coal shutdowns - Calgary Herald
Alberta strikes $1.36-billion deal with power companies to end coal-fired ... - The Globe and Mail
TransAlta Corporation: A Beaten-Up Stock Ready to Bounce?
The Motley Fool Canada - Mar 27, 2017
Falling power prices, high debt, and negative sentiment towards coal-fired electricity producers forced TransAlta to cut its long-beloved dividend, sending investors for the exits.
TransAlta Corporation: Time to Buy This Unloved Stock?
The Motley Fool Canada - Mar 6, 2017
TransAlta went from being a $20 stock at the beginning of 2012 to a $4 stock in early 2016 as a perfect storm of low power prices, an oil crash, and negative sentiment toward coal-fired electricity generation hit the company.
TransAlta Corporation: Is it Finally Time to Own This Stock?
The Motley Fool Canada - Dec 9, 2016
TransAlta owns a number of coal-fired power plants in Alberta, and uncertainty around the future of those assets has been a big reason the company's stock has been under so much pressure.
TransAlta Corporation: Could This Stock Double in 2017?
The Motley Fool Canada - Nov 29, 2016
TransAlta has come under pressure in recent years as falling electricity rates, the oil rout, and government plans to end coal-fired electricity generation hit the company's balance sheet and sent investors running for the hills.
Is TransAlta Corporation Canada's Cheapest Stock?
The Motley Fool Canada - Feb 14, 2017
As a value investor, seeing stocks hit new all-time highs is a little bittersweet. I'm happy my existing stocks are doing well, of course.
TransAlta Corporation: 3 Reasons This Turnaround Could Be Massive
The Motley Fool Canada - Jul 8, 2016
The company has struggled for years now. Back in early 2014, it was weighed down by costly, unexpected repairs and maintenance, a bloated balance sheet, and weakness in the Albertan power market.
Why TransAlta Corporation and Capital Power Corp. Exploded Higher Today
The Motley Fool Canada - Nov 25, 2016
Friday is shaping up to be a very good day for TransAlta Corporation (TSX:TA)(NYSE:TAC) and Capital Power Corp. (TSX:CPX), two struggling power producers that are overexposed to coal-fired energy.
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for TAC to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate TAC's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$5.65 Current Price

$20.15 Growth Price (DCF)

Undervalued by 256.72%


Growth Rate Assumed by Market: -500.00%


Future Free Cash Flow Growth Rate: 0.0%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$13.71 Book Price

Undervalued by 142.71%


Poor Cash Return on Invested Capital over the past 5 years

TAC has been unable to consistently generate sufficient returns from its investments in buildings, projects and equipment. This could be due to poor management, lack of an economic moat or the capital intensive nature of the business.

TAC has only created $1.13 of cash for every $100 invested.
Figures in CAD. Fiscal year ends in December
20122013201420152016
Free Cash Flow -222.00M 172.00M 275.00M -70.00M 365.00M
divided by
Invested Capital 8.04B 8.87B 8.34B 10.04B 9.47B
Cash ROIC -2.76% 1.94% 3.30% -0.70% 3.85%

Poor Return on Equity over the past 5 years

TAC has shown an inability to deliver strong results for shareholders. This could be due to poor management, TAC operating in a highly competitive industry, or having a weak business in general.

TAC has only generated $0.02 of Earnings for every $100 of Shareholders' Equity.
Figures in CAD. Fiscal year ends in December
20122013201420152016
Net Income -546.00M -4.00M 232.00M 116.00M 276.00M
divided by
Stockholders' Equity 3.01B 2.91B 3.28B 3.36B 3.51B
Return on Equity -18.14% -0.14% 7.06% 3.45% 7.86%

Good Business Performance over the past 10 years

It's likely TAC has been unable to maintain profitability in tough economic times, making it a somewhat cyclical business. The other possibility is TAC has expended significant capital on items such as property, plant and equipment in specific years. Look for correlations.

TAC has created positive free cash flow for 7 or 8 of the past 10 years.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Free Cash Flow 248.10M 31.57M -324.00M 21.00M 211.00M -222.00M 172.00M 275.00M -70.00M 365.00M

Weak Balance Sheet

TAC's financial position is not ideal. The key is to check whether TAC is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Cash 50.90M 49.78M 226.00M 323.00M 440.00M 27.00M 62.00M 43.00M 54.00M 305.00M
Current Assets 818.50M 913.06M 838.00M 860.00M 1.12B 938.00M 747.00M 854.00M 1.16B 1.55B
Total Assets 7.18B 7.81B 9.76B 9.89B 9.76B 9.45B 9.78B 9.83B 10.95B 11.00B
Current Liabilities 1.50B 1.64B 843.00M 1.17B 1.19B 1.39B 852.00M 1.45B 853.00M 1.22B
Total Liabilities 4.88B 5.30B 6.83B 6.72B 6.49B 6.44B 6.88B 6.55B 7.59B 7.49B
Stockholder' Equity 2.30B 2.51B 2.93B 3.18B 3.27B 3.01B 2.91B 3.28B 3.36B 3.51B
Current Ratio 0.54 0.56 0.99 0.73 0.94 0.68 0.88 0.59 1.36 1.28
TL-to-TA 0.68 0.68 0.70 0.68 0.67 0.68 0.70 0.67 0.69 0.68

Low or No Reinvestment of Profits over the past 10 years

TAC has either been retaining a small amount of their earnings or has done so inconsistently. A lack of consistency could be due to TAC operating at a loss or them having such a strong economic moat they feel comfortable spending profits on growth. Be wary of future prospects and if applicable, inspect the moat's sustainability.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Retained Earnings 762.50M 688.44M 634.00M 533.00M 527.00M -358.00M -735.00M -770.00M -1.02B -933.00M
Retained Earnings Growth - -9.71% -7.91% -15.93% -1.13% -167.93% -105.31% -4.76% -32.21% 8.35%

Highly Competitive Industry over the past 10 years

It's likely that TAC is in an industry with low barriers to entry, spurring high competition. If Gross Margins are at least satisfactory, it's likely TAC invests heavily in R&D and Sales, General & Administrative expenses.

Only $4.56 of every $100 of Revenue have been profit, on average over the past 10 years.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Net Income 308.80M 235.55M 181.00M 219.00M 305.00M -546.00M -4.00M 232.00M 116.00M 276.00M
divided by
Revenue 2.77B 3.11B 2.77B 2.82B 2.66B 2.26B 2.29B 2.62B 2.27B 2.40B
Net Profit Margin 11.13% 7.58% 6.53% 7.77% 11.45% -24.14% -0.17% 8.84% 5.12% 11.51%

Strong Pricing Power over the past 10 years

TAC has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. This potentially leaves flexibility in inflationary environments to raise prices on consumers and maintain profitability.

$61.82 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Gross Profit 1.54B 1.62B 1.54B 1.62B 2.66B 1.45B 1.37B 1.53B 1.26B 1.43B
divided by
Revenue 2.77B 3.11B 2.77B 2.82B 2.66B 2.26B 2.29B 2.62B 2.27B 2.40B
Gross Margin 55.65% 51.97% 55.67% 57.36% 100.00% 64.24% 59.60% 58.37% 55.54% 59.82%

High Capital Intensity over the past 10 years

TAC spends large amounts of capital buying new equipment or investing in new facilities to stay competitive. Over the long term, those costs may have to be fuelled by debt. Look at the growth of Shareholders' Equity to see if this strategy is having a positive or negative impact.

304.31% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Capital Expenditure 599.10M 1.01B 904.00M 790.00M 483.00M 742.00M 593.00M 521.00M 502.00M 379.00M
divided by
Net Income 308.80M 235.55M 181.00M 219.00M 305.00M -546.00M -4.00M 232.00M 116.00M 276.00M
Capital Expenditure Ratio 194.01% 427.32% 499.45% 360.73% 158.36% -135.90% -14,825.00% 224.57% 432.76% 137.32%

Very Strong Dividend History over the past 10 years

TAC has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests TAC is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Dividend Paid 204.80M 212.48M 284.00M 216.00M 206.00M 195.00M 154.00M 265.00M 170.00M 111.00M
divided by
Shares Outstanding 202.50M 199.00M 201.00M 219.00M 222.00M 235.00M 264.00M 273.00M 280.00M 288.00M
Dividend Paid Per Share 1.00 1.06 1.40 0.98 0.92 0.82 0.58 0.96 0.60 0.38
Price at Year End 27.61 16.60 19.77 19.82 20.34 15.06 12.57 9.11 3.52 5.50
Dividend Yield 3.63% 6.38% 7.09% 4.94% 4.53% 5.47% 4.60% 10.57% 17.11% 6.95%

History of Stock Buybacks over the past 10 years

TAC has some history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in CAD. Fiscal year ends in December
2007200820092010201120122013201420152016
Shares Outstanding 202.50M 199.00M 201.00M 219.00M 222.00M 235.00M 264.00M 273.00M 280.00M 288.00M
Stock Bought Back - 1.76% -1.00% -8.22% -1.35% -5.53% -10.98% -3.30% -2.50% -2.78%
Share your thoughts about TAC

Sign Up or Log In to start contributing!


Discussion

Nothing here yet. Be the first to post!