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Transalta Corp. (TSE:TA)
TSX:TA
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TransAlta (TA) AI Stock Analysis

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TransAlta

(TSX:TA)

Rating:71Outperform
Price Target:
C$18.50
▲(13.08%Upside)
TransAlta's overall stock score is bolstered by strong operational performance and strategic financial decisions highlighted in the earnings call. However, the company's high leverage and declining profitability are significant concerns, along with valuation challenges indicated by a negative P/E ratio.
Positive Factors
Earnings
TransAlta has been upgraded to BUY due to more tangible evidence of durably higher AESO power prices following large load integration.
Market Opportunities
Alberta is well-positioned to attract data center customers given its excess firm capacity position, access to cheap gas, and supportive administration.
Valuation
TransAlta's free cash flow yield is highly attractive compared to its peers, trading at over 14%.
Negative Factors
Growth Prospects
The renewable development pipeline is mostly on hold, and no associated value is ascribed to it in the current model.
Investor Confidence
Shares have retreated 39% YTD, indicating a reduction in investor confidence due to the impracticality of attracting top-tier AI customers.
Trade Tensions
The hype of attracting blue chip AI customers has waned due to the impracticality of U.S.-based top-tier AI customers moving across borders during heightened trade tension.

TransAlta (TA) vs. iShares MSCI Canada ETF (EWC)

TransAlta Business Overview & Revenue Model

Company DescriptionTransAlta Corporation is a leading Canadian power generation and energy trading company headquartered in Calgary, Alberta. It operates a diversified portfolio of energy assets, including coal, natural gas, wind, hydroelectric, and solar power facilities. TransAlta focuses on providing reliable, sustainable, and affordable energy solutions across Canada, the United States, and Australia, while also engaging in energy trading and marketing operations.
How the Company Makes MoneyTransAlta makes money primarily through the generation and sale of electricity. The company operates a diverse mix of energy facilities that produce power from various sources such as coal, natural gas, wind, hydroelectric, and solar. Revenue is generated by selling this electricity to wholesale markets, utilities, industrial customers, and government entities. Additionally, TransAlta engages in energy trading and marketing, where it buys and sells electricity and other energy commodities to optimize its portfolio and manage risk. The company also enters into long-term contracts with customers, which provide stable and predictable cash flows. Significant partnerships, such as joint ventures or collaborations with other energy companies, can further enhance revenue streams and operational efficiencies.

TransAlta Earnings Call Summary

Earnings Call Date:May 07, 2025
(Q1-2025)
|
% Change Since: 32.05%|
Next Earnings Date:Aug 01, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong operational performance, strategic partnerships, and financial discipline with increased dividends and a successful green note offering. However, these positives were tempered by lower adjusted EBITDA and free cash flow, mainly due to weaker market conditions in Alberta.
Q1-2025 Updates
Positive Updates
Exceptional Operational Performance
TransAlta delivered exceptional operational performance across its entire fleet during the first three months of 2025, with average fleet availability at 94.9%.
Dividend Increase
TransAlta announced an 8% increase to its common share dividend to $0.26 per share on an annualized basis, marking the sixth consecutive annual dividend increase.
Strategic Partnership with Nova Clean Energy
TransAlta formed a strategic partnership with Nova Clean Energy, including a $100 million revolving credit facility and a $75 million term loan to Nova, with exclusive options to purchase projects developed by Nova in the WECC region.
Successful Green Note Offering
TransAlta successfully closed a $450 million, seven-year senior unsecured green note offering with a coupon of 5.625% maturing in 2032, marking a return to the Canadian debt capital market for the first time since 2013.
Negative Updates
Lower Adjusted EBITDA
Adjusted EBITDA of $270 million was $72 million lower compared to the first quarter of 2024, primarily due to milder weather in Alberta and lower power prices.
Decreased Energy Marketing EBITDA
Energy marketing adjusted EBITDA decreased by $18 million to $21 million, mainly due to muted market volatility across North American natural gas and power markets.
Lower Free Cash Flow
Free cash flow of $139 million in the first quarter was lower than the same period last year, due to lower adjusted EBITDA, higher sustaining capital expenditures, and higher net interest expense.
Company Guidance
During the TransAlta Corporation First Quarter 2025 Results Conference Call, the company provided comprehensive guidance on their financial and operational performance. TransAlta reported an adjusted EBITDA of $270 million and free cash flow of $139 million, translating to $0.47 per share. A significant highlight was the announcement of an 8% increase in their common share dividend to $0.26 per share on an annualized basis, marking the sixth consecutive annual dividend increase. They also returned $24 million to shareholders through share buybacks at an average price of $12.42 per share. The company demonstrated strong operational performance with a 94.9% average fleet availability and is actively managing its Alberta merchant portfolio through hedging strategies that realized prices well above spot prices. Looking ahead, TransAlta aims to maintain its guidance range for 2025, supported by a hedging strategy that covers approximately 75% of expected generation revenue. The company is also focusing on diversifying its portfolio, decreasing reliance on the Alberta market, and exploring M&A opportunities to enhance shareholder value.

TransAlta Financial Statement Overview

Summary
The financial performance of TransAlta is mixed, with strong cash flow generation and stable operating efficiency. However, declining revenues and profitability, coupled with high leverage, are concerning. While the Equity Ratio is stable, a focus on revenue growth and profitability improvement is needed.
Income Statement
62
Positive
TransAlta's income statement shows a mixed performance. The Gross Profit Margin for the TTM (Trailing-Twelve-Months) is 56.43%, indicating a healthy ability to cover operating expenses. However, the Net Profit Margin has decreased significantly to 2.00% in TTM, reflecting reduced profitability. Revenue has declined from $2.845 billion in 2024 to $2.656 billion in TTM, a decrease of 6.66%, which is concerning for growth. The EBIT Margin and EBITDA Margin are 12.73% and 35.31% respectively, showing stable operating efficiency despite lower revenues.
Balance Sheet
68
Positive
The balance sheet reflects a stable but leveraged financial position. The Debt-to-Equity Ratio stands at 2.67 in TTM, indicating high leverage and potential risk if revenues decline. Return on Equity is low at 3.06% for TTM, down from 13.12% in 2024, suggesting reduced shareholder returns. However, the Equity Ratio is stable at 18.26%, signifying a moderate level of equity financing in the asset structure.
Cash Flow
75
Positive
TransAlta's cash flow performance is robust with a strong Operating Cash Flow to Net Income Ratio of 10.55 in TTM, indicating efficient cash generation from operations. The Free Cash Flow to Net Income Ratio is 5.21, showing good conversion of profits into free cash flow. However, Free Cash Flow has decreased by 41.89% compared to 2024, which impacts future investment capabilities.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue2.66B2.85B3.35B2.98B2.72B2.10B
Gross Profit1.50B1.79B1.64B1.64B1.49B1.13B
EBITDA938.00M1.10B1.71B1.23B591.00M738.00M
Net Income53.00M229.00M695.00M161.00M-425.00M-253.00M
Balance Sheet
Total Assets9.48B9.50B8.66B10.74B9.23B9.75B
Cash, Cash Equivalents and Short-Term Investments238.00M337.00M348.00M1.13B947.00M703.00M
Total Debt4.63B4.56B4.21B3.67B3.27B3.36B
Total Liabilities7.66B7.66B7.00B8.75B6.63B6.31B
Stockholders Equity1.73B1.75B1.54B1.11B1.58B2.35B
Cash Flow
Free Cash Flow276.00M475.00M576.00M-72.00M512.00M202.00M
Operating Cash Flow559.00M796.00M1.46B877.00M1.00B702.00M
Investing Cash Flow-588.00M-520.00M-814.00M-741.00M-472.00M-687.00M
Financing Cash Flow-139.00M-291.00M-1.43B45.00M-282.00M272.00M

TransAlta Technical Analysis

Technical Analysis Sentiment
Positive
Last Price16.36
Price Trends
50DMA
14.03
Positive
100DMA
13.58
Positive
200DMA
14.95
Positive
Market Momentum
MACD
0.46
Negative
RSI
72.44
Negative
STOCH
92.39
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:TA, the sentiment is Positive. The current price of 16.36 is above the 20-day moving average (MA) of 15.06, above the 50-day MA of 14.03, and above the 200-day MA of 14.95, indicating a bullish trend. The MACD of 0.46 indicates Negative momentum. The RSI at 72.44 is Negative, neither overbought nor oversold. The STOCH value of 92.39 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:TA.

TransAlta Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
TSCPX
75
Outperform
C$9.10B12.6915.24%4.41%-27.55%-12.05%
TSNPI
73
Outperform
$6.10B23.426.08%5.17%-5.33%
TSINE
72
Outperform
C$2.79B69.914.20%2.62%0.97%
TSTA
71
Outperform
$4.77B21.522.97%1.59%-17.34%-100.03%
61
Neutral
C$5.02B-18.31-18.56%4.32%11.65%-69.08%
TSBLX
59
Neutral
C$3.25B295.230.67%2.08%-16.63%-87.78%
TSAQN
56
Neutral
$6.14B5.54%4.43%-4.74%-213.24%
* Utilities Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:TA
TransAlta
16.63
7.13
75.07%
TSE:NPI
Northland Power
23.09
1.42
6.54%
TSE:AQN
Algonquin Power & Utilities
8.07
0.35
4.57%
TSE:CPX
Capital Power
59.13
21.02
55.16%
TSE:BLX
Boralex Inc Cl A
31.82
-0.03
-0.09%
TSE:INE
Innergex Renewable Energy
13.73
4.11
42.72%

TransAlta Corporate Events

Dividends
TransAlta Declares Quarterly Dividends on Preferred Shares
Positive
Apr 23, 2025

TransAlta Corporation has announced the declaration of quarterly dividends on its Cumulative Redeemable Rate Reset First Preferred Shares for the period from March 31, 2025, to June 30, 2025. This announcement reflects the company’s commitment to delivering shareholder value through consistent dividend payouts, which may impact investor confidence and the company’s financial positioning in the energy sector.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Jul 18, 2025