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Transalta Corp. (TSE:TA)
TSX:TA
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TransAlta
(TSX:TA)
61Neutral
Positive Factors
Data Center Deals
The company is one of the best-positioned to benefit from potential Alberta data center co-located deals, potentially leading to material potential EBITDA/FCF and valuation upside.
Renewables and Hydro Assets
Significant upside opportunity from Alberta co-located AI data center deals, attractive relative valuation, under-appreciated hydro assets, and structural shift to more renewables composition support maintaining the Outperform rating.
Valuation
TA trades at a discount to other Canadian energy infrastructure asset classes and U.S. IPP's, making it a compelling investment opportunity.
Negative Factors
Acquisition Delays
The $658M Heartland acquisition announced on Nov. 2, 2023 is taking longer than expected to close, with the last remaining hurdle being Federal Competition Bureau approval.
TransAlta (TA) vs. S&P 500 (SPY)
Market Cap
$4.04B
Dividend Yield1.83%
Average Volume (3M)2.13M
Price to Earnings (P/E)23.1
Beta (1Y)0.68
Revenue Growth-15.20%
EPS Growth-77.12%
CountryCA
Employees1,165
SectorUtilities
Sector Strength77
IndustryIndependent Power Producers
Share Statistics
EPS (TTM)0.56
Shares Outstanding297,900,300
10 Day Avg. Volume1,465,805
30 Day Avg. Volume2,129,940
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.47
Price to Cash Flow (P/CF)4.90
P/FCF Ratio5.20
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$20.41Price Target Upside51.65% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering5
TransAlta Business Overview & Revenue Model
Company DescriptionTransAlta Corporation owns, operates, and develops a diverse fleet of electrical power generation assets in Canada, the United States, and Australia. It operates through four segments: Hydro, Wind and Solar, Gas, and Energy Transition. owns and operates hydro, wind and solar, natural gas-fired, and coal-fired facilities. The company also engages in wholesale trading of electricity and other energy-related commodities and derivatives; and related mining operations and natural gas pipeline operations. It serves municipalities, medium and large industries, businesses, and utility customers. The company was founded in 1909 and is headquartered in Calgary, Canada.
How the Company Makes MoneyTransAlta makes money primarily through the generation and sale of electricity. Its revenue model is centered on long-term power purchase agreements (PPAs), merchant power sales, and energy trading activities. The company earns income by selling electricity generated from its diverse fleet of power plants to wholesale markets, utility companies, and industrial customers. Key revenue streams include contracted and merchant generation sales, capacity payments, and ancillary services. TransAlta's strategic partnerships and joint ventures in renewable energy projects also contribute to its earnings by enhancing its clean energy offerings and expanding its market reach. Additionally, the company engages in energy trading to optimize its asset portfolio and manage market risks, which provides an additional revenue stream.
TransAlta Financial Statement Overview
Summary
TransAlta's financial performance shows strong gross margins and cash conversion from operations. However, challenges like declining net profit margins, high leverage, and reduced free cash flow growth highlight areas requiring strategic focus.Income Statement
TransAlta's income statement shows a mix of strengths and weaknesses. The gross profit margin for 2024 is approximately 63.05%, indicating strong profitability from revenues. However, the net profit margin has declined significantly from 20.72% in 2023 to 8.05% in 2024, reflecting challenges in maintaining net income levels. Revenue growth has been inconsistent, with a decline of 15.22% from 2023 to 2024. The EBIT margin is 20.56% for 2024, down from 32.46% in 2023, showing reduced operational efficiency. EBITDA margin remains robust at 38.65%, though slightly down from 51.05% in the previous year.70
Positive
Balance Sheet
The balance sheet indicates a stable yet cautious financial position. The debt-to-equity ratio increased to 2.61 in 2024 from 2.74 in 2023, suggesting high leverage and potential financial risk. Return on equity (ROE) decreased from 45.21% in 2023 to 13.12% in 2024, which may concern investors regarding profitability on equity. Equity ratio stands at 18.38%, down from 17.75% in 2023, indicating a slightly improved but still low equity base compared to total assets.65
Positive
Cash Flow
Cash flow metrics reveal areas for improvement. The free cash flow growth rate is negative, at -17.53% from 2023 to 2024, indicating a decline in available cash for reinvestment. The operating cash flow to net income ratio is strong at 3.48, illustrating good cash conversion from income. However, the free cash flow to net income ratio is 2.07, reflecting a significant drop from the previous year, which could raise concerns about cash availability.60
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 2.85B | 3.35B | 2.98B | 2.72B | 2.10B | Gross Profit |
| 1.79B | 1.64B | 1.64B | 1.49B | 1.13B | EBIT |
| 585.00M | 1.09B | 531.00M | 445.00M | -16.00M | EBITDA |
| 1.10B | 1.71B | 1.23B | 591.00M | 738.00M | Net Income Common Stockholders |
| 229.00M | 695.00M | 161.00M | -425.00M | -253.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 337.00M | 348.00M | 1.13B | 947.00M | 703.00M | Total Assets |
| 9.50B | 8.66B | 10.74B | 9.23B | 9.75B | Total Debt |
| 4.56B | 4.21B | 3.67B | 3.27B | 3.36B | Net Debt |
| 4.22B | 3.87B | 2.54B | 2.32B | 2.66B | Total Liabilities |
| 7.66B | 7.00B | 8.75B | 6.63B | 6.31B | Stockholders Equity |
| 1.75B | 1.54B | 1.11B | 1.58B | 2.35B |
| Cash Flow | Free Cash Flow | |||
| 475.00M | 576.00M | -72.00M | 512.00M | 202.00M | Operating Cash Flow |
| 796.00M | 1.46B | 877.00M | 1.00B | 702.00M | Investing Cash Flow |
| -520.00M | -814.00M | -741.00M | -472.00M | -687.00M | Financing Cash Flow |
| -291.00M | -1.43B | 45.00M | -282.00M | 272.00M |
TransAlta Technical Analysis
Negative
13.46
Price Trends
15.42
Negative
16.37
Negative
14.02
Negative
Market Momentum
-0.42
Negative
37.95
Neutral
35.97
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:TA, the sentiment is Negative. The current price of 13.46 is below the 20-day moving average (MA) of 13.83, below the 50-day MA of 15.42, and below the 200-day MA of 14.02, indicating a bearish trend. The MACD of -0.42 indicates Negative momentum. The RSI at 37.95 is Neutral, neither overbought nor oversold. The STOCH value of 35.97 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:TA.
TransAlta Peers Comparison
Overall Rating
UnderperformOutperform
Sector (65)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
69 Neutral | C$6.85B | 9.54 | 18.00% | 5.15% | -26.31% | -14.85% | |
68 Neutral | C$2.76B | 268.24 | 1.44% | 2.65% | 2.60% | ― | |
65 Neutral | $12.09B | 16.10 | 6.13% | 4.39% | 5.50% | -7.46% | |
64 Neutral | C$3.00B | 83.36 | 2.23% | 2.26% | -16.54% | -53.85% | |
61 Neutral | $4.04B | 23.14 | 14.31% | 1.83% | -15.20% | -77.12% |
* Utilities Sector Average
Performance Comparison
TSE:TA
TransAlta
13.56
5.04
59.06%
TSE:BLX
Boralex Inc Cl A
29.10
1.03
3.67%
TSE:CPX
Capital Power
49.03
12.53
34.33%
TSE:INE
Innergex Renewable Energy
13.57
5.84
75.55%
AQN
Algonquin Power & Utilities
5.19
-0.75
-12.63%
EMRAF
Emera
41.93
9.09
27.68%
TransAlta Earnings Call Summary
Earnings Call Date: Feb 20, 2025 | % Change Since: -9.83% | Next Earnings Date: May 2, 2025
Earnings Call Sentiment Positive
The earnings call presented a generally positive outlook for TransAlta, with strong financial performance, strategic acquisitions, significant achievements in emission reductions, and a continued focus on returning value to shareholders. However, there were challenges related to lower Alberta spot prices and increased costs, particularly in the Gas segment.Highlights
Strong Financial Performance
TransAlta delivered strong financial and operational performance in 2024, achieving adjusted EBITDA of $1.25 billion and free cash flow of $569 million, both at the upper range of guidance.
Significant Emission Reductions
Since 2015, TransAlta reduced Scope 1 and Scope 2 greenhouse gas emissions by 22.7 megatons or 70%.
Heartland Acquisition
Successfully closed the acquisition of Heartland, adding 1.75 gigawatts of capacity and enhancing the competitive position in Alberta.
Completed Key Projects
Completed the 200-megawatt Horizon Hill Wind facility, the 300-megawatt White Rock wind facilities, and the Kent Hills rehabilitation, contributing over $175 million in adjusted EBITDA annually.
Dividend Increase
Announced an 8% increase to the common share dividend, representing the sixth consecutive annual increase.
Lowlights
Decline in Alberta Spot Prices
The 2024 spot price in Alberta averaged $63 per megawatt hour, significantly lower than the $134 per megawatt hour in 2023, due to new gas, wind, and solar supply.
Higher Corporate Costs
Corporate costs increased year-over-year, primarily due to increased spending to support strategic and growth initiatives.
Gas Segment Decline
The Gas segment saw adjusted EBITDA decrease by 18% in the fourth quarter due to lower realized power prices in Alberta and higher carbon pricing.
Company Guidance
During the TransAlta Corporation's fourth quarter and full year 2024 results conference call, the company announced that it achieved strong financial and operational performance, meeting the upper range of its guidance. TransAlta delivered an adjusted EBITDA of $1.25 billion and a free cash flow of $569 million, equivalent to $1.88 per share. The company reported an average fleet availability of 91.2% and returned $214 million, or $0.71 per share, to shareholders through dividends and share repurchases at an average price of $10.59 per share. TransAlta also highlighted strategic initiatives such as the Heartland acquisition, which added 1.75 gigawatts of capacity, contributing an estimated $175 million annually to adjusted EBITDA. The company announced an 8% dividend increase to $0.26 per share, marking the sixth consecutive annual increase. Looking ahead, TransAlta's 2025 guidance anticipates adjusted EBITDA between $1.15 billion and $1.25 billion and free cash flow ranging from $450 million to $550 million, or $1.51 to $1.85 per share.TransAlta Corporate Events
TransAlta Completes Heartland Generation Acquisition
Dec 4, 2024
TransAlta Corporation has successfully completed its acquisition of Heartland Generation Ltd. and Alberta Power (2000) Ltd. for a net cash payment of $215 million. This strategic move enhances TransAlta’s power generation capabilities across Alberta and British Columbia, while complying with federal regulations by planning to divest certain assets.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.