July 3, 2022 4:59 AM

Undervalued at best: A look at TransAlta and its stock

Despite its many achievements and good performance, TransAlta’s stock continue to struggle.

/ Published 4 years ago

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To assess trading opportunities, investors are constantly examining different company financial indicators, scanning various shelves for bargain stocks, and those good deals that are often overlooked by the rest of the investing world, and TransAlta’s stock is more or less the same variety and breed.

Generally, despite the company continuing to do well in the market, its stock has always been trashed alongside all high yield Canadian stocks. This is in spite of the company exhibiting a diversified portfolio that consists of clean energy power generating plants on key locations in the U.S., Canada, and Australia, which is an asset class that, given today’s need for renewable energy sources, is in very high demand. The stock for it has always struggled to prove its worth in the market, and the very low leverage and spaced-out maturities make its stock one of the most defensive to own in the current environment.

So why is this the case?

A look at TransAlta’s stock

No two investors are the same, and what one investor may favor may not be the same case for another. This is especially true in the investing world, where something as simple as a shift in the current trend can cause assets to go up and down and make the entire space intensely volatile. As such, investors use different tools and instruments to gauge out stocks they would want to invest on.

One such instrument is the EV (Enterprise Value), which is basically a modification of market cap. The EV is used to show how the market assigns a value to a company as a whole, and TransAlta presently has an EV of 3885084.

There’s also the ROIC, which is a profitability ratio that measures the return that an investment makes for those that initially provided that capital. In essence, an ROIC helps show how efficient a company is at turning its capital into actual profits and therefore can be used as a good measure to view when one is examining whether it’s a good idea to invest in a company.

Presently, TransAlta’s ROIC is 0.041944, with its 5 year average at 0.039711 and its ROIC quality at 3.088292. Furthermore, the company also has a current Value Composite score of 34, making it an undervalued stock at the market.

TransAlta
TransAlta provides clean, affordable, energy efficient and reliable power. (Source)

Bottom line

Despite being undervalued, TransAlta’s diversified portfolio will help make its stock more valuable over time, especially now that the world is moving into a more environmentally aware state.

A provider of clean, affordable, energy efficient and reliable power, TransAlta is a proud achiever of the Silver level PAR (Progressive Aboriginal Relations) designation by the Canadian Council for Aboriginal Business and is recognized by the CDP as an industry leader on Climate Change Management.

Per an announcement today, TransAlta Corporation’s Board of Directors declared a quarterly dividend of $0.04 per common share payable on April 1, 2019, to shareholders of record at the close of business come March 1, 2019.

(Featured image by Qyd via Wikimedia Commons. CC BY-SA 3.0)

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