Is it a good company at a reasonable price? This company has come off its recent high of $20.89 in January 2025, but it is still testing as relatively expensive using the P/S Ratio. Ultimately, you need increasing revenue to increase both earnings and cash flow. Analysts expect Revenue to decline in 2025 and 2026. That does not inspire confidence in me that the current price is reasonable. It is good that they are increasing the dividends, but this is at the expense of DPR. This does not inspire confidence either. I know that a number of analysts rate it as a buy, but most stocks are rated as Buys, so this does not help either. I find it currently relatively expensive.
I do not own this stock of TransAlta Corp (TSX-TA, NSYE-TAC). I bought this stock in 1987. It was a utility stock and utility stocks were considered to be good investments. I sold some in 2000 as the stock price was below what I had paid for it. I bought some more in February 2009 because it was relatively cheap and it seemed to be recovering. I sold more in August 2012 as this company was doing poorly again. By September 2019, I had finally had enough and saw no hope in this stock doing better. I noticed that MPL communications had given up hope in 2014.
When I was updating my spreadsheet, I noticed the stock price was high at the end of 2024 at $20.33 with an 84.5% gain, but is down to $13.40 currently with a year to loss of 34%. I also noticed a couple of officers I follow decreased their share holdings from last year, but the CEO and Chairman both bought shares.
I noticed that if I had held on to my shares that I bought in 1987, I would be making a dividend yield on the original stock price of just 1.79%. It may be a dividend growth stock again, but dividends are really low and exceptionally for long term holders.
If you had invested in this company in December 2014, for $1,009.92 you would have bought 96 shares at $10.52 per share. In December 2024, after 10 years you would have received $240 in dividends. The stock would be worth $1,951.68. Your total return would have been $2,191.68. This would be a total return of 8.79% per year with 6.81% from capital gain and 1.98% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $10.52 | $1,009.92 | 96 | 10 | $240.00 | $1,951.68 | $2,191.68 |
The current dividend yield is low with dividend growth low. The current dividend yield is low (below 2%) at 1.89%. The 5 year median dividend yield is low at 1.63%. The 10 year median dividend yield is moderate (2% to 4% ranges) at 2.03%. The historical median dividend yield is good (5% to 6% ranges) at 5.35%.
The dividend increases are low (below 8% per year) at 7.99% per year over the past 5 years. The last dividend increase was in 2025 and it was for 9.09%. There were a number of decreases to the dividends between 2014 and 2017. Dividends have been increasing since 2020.
The Dividend Payout Ratios (DPR) are good. The DPR for 2024 for Earnings per Share (EPS) is at 40% with 5 year coverage non-calculable because of earnings loss. The DPR for 2024 for Adjusted Funds from Operations (AFFO) is good at 13% with 5 year coverage at 8%. The DPR for 2024 for Funds from Operations (FFO) is good at 4% with 5 year coverage at 5%.
The DPR for 2024 for Cash Flow per Share (CFPS) is good at 9% with 5 year coverage at 6%. The DPR for 2024 for Free Cash Flow 1 (FCF 1) is good non-calculable due to negative FCF with 5 year coverage good at 16%. The DPR for 2024 for Free Cash Flow 2 (FCF 2) is good at 12% with 5 year coverage good at 8%. This last FCF is value provided by the company and estimates are based on this FCF.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 39.83% | N/C |
| AFFO | 12.57% | 8.27% |
| FFO | 4.42% | 5.34% |
| CFPS | 9.22% | 6.00% |
| FCF 1 | N/C | 15.71% |
| FCF 2 | 12.48% | 8.32% |
Debt Ratios are awful. The Long Term Debt/Market Cap Ratio for 2024 is good at 0.54 and currently rather high at 0.81. The Liquidity Ratio for 2024 is much too low at 0.69 and 0.69 currently. If you added in Cash Flow after dividends, the ratios are still much too low at 0.97 and currently at 0.92. If you take off the current portion of the debt the ratio is still low at just 1.25. I prefer this ratio to be 1.50 or higher. The Debt Ratio for 2024 is too low at 1.24 and 1.24 currently. I prefer this ratio to be 1.50 or higher. The Leverage and Debt/Equity Ratios for 2024 are far too high at 5.15 and 4.15 and currently at 5.15 and 4.15.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.54 | 0.81 |
| Intang/GW | 0.13 | 0.20 |
| Liquidity | 0.69 | 0.69 |
| Liq. + CF | 0.97 | 0.92 |
| Debt Ratio | 1.24 | 1.24 |
| Leverage | 5.15 | 5.15 |
| D/E Ratio | 4.15 | 4.15 |
The Total Return per year is shown below for years of 5 to 37 to the end of 2024. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2019 | 5 | 7.99% | 18.55% | 16.98% | 1.57% |
| 2014 | 10 | -11.85% | 8.79% | 6.81% | 1.98% |
| 2009 | 15 | -10.10% | 1.58% | -0.96% | 2.54% |
| 2004 | 20 | -6.98% | 4.59% | 0.60% | 3.99% |
| 1999 | 25 | -5.63% | 6.84% | 1.46% | 5.38% |
| 1994 | 30 | -4.65% | 6.68% | 1.13% | 5.55% |
| 1989 | 35 | -4.00% | 6.84% | 1.02% | 5.82% |
| 1987 | 37 | -3.62% | 6.77% | 0.94% | 5.83% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 4.36, 5.18 and 6.00. They are low because of negative P/E Ratios. The corresponding 10 year ratios are negative and useless. The historical ratios are 14.85, 15.26 and 21.19. The current ratio is 37.55 based on a stock price of $13.78 and EPS estimate for 2025 of $0.37. The current ratio is higher than the high ratio of the historical median ratios. This stock price testing suggests that the stock price is relatively expensive.
I also have Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/Adjusted Funds from Operations Ratios are 4.25, 5.83 and 6.95. The corresponding 10 year ratios are 3.94, 5.63 and 7.10. The current P/AFFO Ratio is 8.51 based on a stock price of $13.78 and AFFO estimate for 2025 of $1.62. The current ratio is higher than the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I also have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/Funds from Operations Ratios are 2.22,3.36 and 4.04. The corresponding 10 year ratios are 2.13, 2.83 and 3.39. The current P/AFFO Ratio is 5.67 based on a stock price of $13.78 and AFFO estimate for 2025 of $2.43. The current ratio is higher than the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $12.16. The 10-year low, median, and high median Price/Graham Price Ratios are 0.31, 0.43 and 0.60. The current ratio is 1.13 based on a stock price of $13.87. This stock price testing suggests that the stock price is relatively expensive. I am using the FFO values in this calculation because too many of the Graham Prices over the last 10 years have been estimated because of earnings losses.
I get a 10-year median Price/Book Value per Share Ratio of 1.37. The current P/B Ratio is 5.10 based on a Book Value of $804M, Book Value per Share of $2.70 and a stock price of $13.87. The current ratio is 271% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have a Book Value per Share estimate for 2025 of $2.96. The analysts calculated the book value different that I do and under this method the 10 year ratio is 0.84. The stock price of $13.87 implies a Book Value of $881M and a ratio of 4.66. This ratio is 251% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 3.25. The current ratio is 6.17 based on Cash Flow per Share estimate for 2025 of $2.24, Cash Flow of $665M and a stock price of $13.87. The current ratio is 90% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 5.35%. The current dividend yield is 1.89% based on a dividend of $0.25 and a stock price of $13.87. The current ratio is 65% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. This test is probably not valid because dividend had been decreasing between 2014 and 2017 by about 86%.
I get a 10 median dividend yield of 2.03%. The current dividend yield is 1.89% based on a dividend of $0.25 and a stock price of $13.87. The current ratio is 7% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. This test is probably not valid because dividend had been decreasing between 2014 and 2017 by about 86%. 10 year goes back to 2015. In any case, decreasing dividends is a negative thing.
The 10-year median Price/Sales (Revenue) Ratio is 1.05. The current ratio is 1.66 based on Revenue estimate for 2025 of $2,473, Revenue per Share of $8.31 and a stock price of $13.87. The current ratio is 57% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is seems to point to a relatively expensive price. The 10 year dividend yield testing is pointing to a reasonable stock price but above the median. However dividends have been cut a lot in the past 10 years and dividend cuts are never good. The P/S Ratio test is pointing to a relatively expensive stock price. All the other testing is pointing to a relatively expensive stock price.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (3), Hold (3) and Underperform (1). The consensus would be a Buy. The 12 month consensus stock price if $19.45 with a high of $23.00 and low of $14.00. The consensus 12 month stock price implies a total return of 43.03% with 41.15% from capital gains and 1.89% from dividends.
The only analysts on Stock Chase for 2025 says that the company is back on track. Stock Chase gives this stock 5 stars out of 5. Unbelievable! Andrew Button on Motley Fool does an interesting comparison between this company and Brookfield Renewables. Jitendra Parashar on Motley Fool says he is keeping an eye on this company to buy cheap because it offers solid growth potential. The company put out a Press Release about their fourth quarter of 2024 results.
Simply Wall Street via Yahoo Finance talks about the company missing expectations. Simply Wall Street via Yahoo Finance reviews this stock. There is also a review by Guru Focus via Yahoo Finance. Simply Wall Street has 3 warnings of earnings are forecast to decline by an average of 14.1% per year for the next 3 years; interest payments are not well covered by earnings; and profit margins (6.2%) are lower than last year (19.2%). Simply Wall Street gives this stock one and one half stars out of 5.
TransAlta Corp is an independent power producer based in Alberta, Canada. The company operates a diverse and growing fleet of electrical power generation assets in Canada, the United States, and Australia. The company has six reportable segments namely, Hydro, Wind & Solar, Energy Marketing, Gas, Energy Transition segment and Corporate Segment. The company generates the majority of its revenue from the gas segment. Its web site is here TransAlta Corp.
The last stock I wrote about was about was Enbridge Inc (TSX-ENB, NYSE-ENB) … learn more. The next stock I will write about will be TC Energy Corp (TSX-TRP, NYSE-TRP) … learn more on Wednesday, March 19, 2025 around 5 pm. Tomorrow on my other blog I will write about Wealthsimple…. learn more on Tuesday, March 18, 2025 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
