* Note: Prices are in Million (M) USD.
Description:
TransAlta Corporation (TAC) is a leading independent power producer and operator, specializing in a well-diversified portfolio of renewable and conventional electricity generation assets across Canada, the United States, and Australia. Headquartered in Calgary, Canada, TransAlta is committed to sustainability and has made significant investments in clean energy technologies, positioning itself to meet the evolving demands of the energy market. The company's operational excellence, paired with its strategic growth initiatives in renewable energy, underscores its commitment to delivering reliable power while fostering environmental stewardship.
These criteria used Company's Cash, EBITDA and Debt balance to determines its fair value:
Cash : $222 M
Debt : $4,511 M
EBITDA : $754 M
Net Debt (Debt - Cash): $4,289 M
Since EBITDA cannot cover net debt within 3 years, Avoid This Stock.
This criteria used industry in which company operates:
Sector: Energy & transportation
Industry: Electric services
Based on industry, 3 points assigned.
This criteria used Company's Price To Earning (P/E) Ratio to determines its fair value:
Forward PE Ratio: 76.65
Since Forward PE Ratio is greater than 35, 0 point assigned.
This criteria used Company's ability to convert Sales into free cash flow to determine fair value:
Using last 20 overlapping fiscal years (max 20).Average Free Cash Flow: $207 M
Average Revenue: $2,626 M
Revenue Converted To Free Cash Flow (%): 7.9%
Since Free Cash Flow (FCF) to Revenue percentage is less than 15, 1 point assigned.
This criteria used company's growth potential to calculate its fair value:
Latest Revenue (2024-12-31): $2,845 M
Revenue 5 Years Ago (2019-12-31): $2,347 M
Total Growth over 5 Years: 21.2%
5-Year Revenue CAGR (Historical): 3.9%
Forward 5-Year CAGR (Tapered): 3.5%
Since historical Revenue CAGR is between 0 - 5, 1 point assigned.
This criteria used Company's ability to buy back its own share:
Latest Share Count (2024-12-31): $296 M
Share Count 5 Years Ago (2020-12-31): $275 M
Company is not buying back its own shares, 0 points assigned.
This criteria used Company's dividend payout ratio to determine its fair value:
Next Year Earnings Per Share (EPS): $0.23
Trailing 12-Month Earnings Per Share (EPS): $0.23
Average Earnings Per Share (EPS): $0.23
Dividend Per Share (DPS): $0
Payout Ratio: 107%
Dividend Yield: 1.46%
⚠️ Caution: Further research is recommended — dividend payout ratio is too high (107%).
Since company Payout Ratio is greater than 50, 1 point assigned.
Since Dividend Yield is greater than 1, 1 point assigned.
This criteria used Company's Return On Equity (ROE%) to determine its fair value:
Using last 20 valid ROE years (max 20).Average ROE: 3.8%
Since Average ROE is less than 10, 1 point assigned.
This criteria used Company's current price to its 52 week low price to determines its fair value:
Current Price: $17.63
52-Week Low: $7.75
Threshold Price (15% Above 52-Week Low): $8.91
Since Current price is not within 15% threshold, 0 point assigned.
This criteria used Company's Market Cap to determines its fair value:
Market Capitalization: $5,109 M
Since Market Cap is less than 10B, 1 point assigned.
% Exposure to Total Portfolio
Based on high P/E, we recommend do not exceed 0.20% exposure of Total Portfolio.
Warren Buffett's Owners' Earnings:
Owners' Earnings (FCF/Share) (TTM ending 2025-06-30): $1.03
Owners' Earnings (FCF/Share, latest positive annual) (2024-12-31): $1.60
Note: Many fast-growing companies reinvest heavily, so Owners' Earnings may appear low.
Consider other factors in your valuation.
Value-Trade has assigned 9 points to above TransAlta Corp (TAC) stock.
Last 10 Years Avg PE
18.05, Fair Value PE
9, Industry Based PE
13, Growth Based PE
15, RCFC Based PE
7.88, ROE Based PE
3.76, Risk-Free Anchored PE (25% MoS)
18.2. Based on these 7 values, average assigned is
12.13. Value-Trades has assined P/E value
12.13. An average (Current Year EPS + Next Year EPS) earning per share is
$0.23.
Fair value using multiple P/Es (blended): $2.79 (PE 12.13 × EPS $0.23)
So the Final Fair Value is: $2.79
Understanding the Value-Trades P/E Blend (click to expand)
▾
What goes into the blended P/E?
- 20-Year Avg P/E — Long-run market baseline; conservative anchor.
- Fair Value P/E — Score-based (cash, debt, sector, etc.).
- Industry P/E — Peer group norm.
- Growth-Based P/E — Uses tapered growth rates, floored at 15.
- RCFC-Based P/E — Maps cash conversion efficiency.
- ROE-Based P/E — Higher ROE supports higher multiples.
- Risk-Free Anchored P/E — Macro floor tied to 10y yield w/ MoS.
How it works
- Extreme values are clamped/filtered (IQR method).
- Anchors (20y avg, RCFC/ROE, risk-free) are always kept if valid.
- Final fair value = min(Blended PE × EPS, Avg PE × EPS).
P/E Reference Summary
Using EPS: $0.23
Using Owners' Earnings (Latest FCF/Share): $1.03
Note: Many highly growing companies reinvest heavily back into the business,
so their Owners' Earnings may appear very low. In such cases, other criteria should
be considered to assess the company’s true worth.
| Source |
P/E Ratio |
Implied Fair Value |
| Market (1 Yr Ago) | 28.89 | $6.64 |
| 10 Yrs Avg-PE | 18.05 | $4.15 |
| Value-Trades Assigned | 12.13 | $2.79 |
| Owners' Earnings × 10 Yrs Avg-PE | 18.05 | $18.59 |
