July 27, 2023
Top 10 Stock TransAlta Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: TransAlta – Top 10 Stock in Toronto Stock Exchange Index TSX Composite
TransAlta is listed as a top 10 stock on July 27, 2023 in the market index TSX Composite because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. The company is safely financed and the professional investor sentiment is positive. Both are encouraging signals for a stock purchase decision, albeit at an above-average share price. Based on the Obermatt 360° View of 55 (high 55% performer), Obermatt assesses an overall buy recommendation for TransAlta on July 27, 2023.
Snapshot: Obermatt Ranks
| Country | Canada |
| Industry | Power Producers & Traders |
| Index | Low Emissions, TSX Composite |
| Size class | Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View TransAlta Buy
| 360 METRICS | July 27, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 35 |
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| GROWTH | ||||||||
| GROWTH | 19 |
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| SAFETY | ||||||||
| SAFETY | 57 |
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| SENTIMENT | ||||||||
| SENTIMENT | 100 |
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| 360° VIEW | ||||||||
| 360° VIEW | 55 |
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ANALYSIS: With an Obermatt 360° View of 55 (better than 55% compared with alternatives), overall professional sentiment and financial characteristics for the stock TransAlta are above average. The 360° View is based on consolidating four consolidated indicators, with half below and half above average for TransAlta. The consolidated Sentiment Rank has a good rank of 100, which means that professional investors are more optimistic about the stock than for 100% of alternative investment opportunities. It also rates well regarding its financing structure, with the consolidated Safety Rank at 57 or better than 57% of its peers when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. But the stock is expensive and expects low growth. The consolidated Value Rank is only 35, meaning that the share price of TransAlta is on the high side, compared with indicators such as revenues, profits, and invested capital. The company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth,and stock returns, with its Growth Rank at 19. ...read more
RECOMMENDATION: With a consolidated 360° View of 55, TransAlta is better positioned than 55% of all alternative stock investment opportunities based on the Obermatt Method. As only half of the consolidated Obermatt Ranks exhibit excellent performance, namely the positive professional market sentiment (Sentiment Rank of 100) and safe financing practices (Safety Rank of 57), the case for investing in this stock needs further thought. The Value and the Safety Ranks are below average. The Safety Rank is the least critical of the four consolidated ranks, because it only reflects financing practices. So the question is: How to assess below-average value against above-average sentiment? This may be a case where growth is in the future, not yet reflected in current performance. Companies that might fall into this category are those with intellectual property, such as technology and pharmaceutical companies. In early phases, they are expensive relative to their size and have a lot of capital on their books, as is the case here. Investors expect a better future and are willing to pay a higher price than is warranted by the current company size. These higher prices drive stock price value down in the short term. In this case, future growth may be the strongest driver of the investment case, reflected by institutional investors' opinions. With a weak Value Rank, the question is how much to sacrifice value at the cost of positive sentiment. Sometimes market sentiment is just hype, but sometimes it is right. You pay more than market-average for this stock, but it may be worth it, if the future of TransAltạ is bright. Prudent investors may only want to invest a smaller portion of their wealth in such situations. Young investors can carry more risk but should still thrive for sufficient diversification. ...read more
Sentiment Strategy: Professional Market Sentiment for TransAlta very positive
ANALYSIS: With an Obermatt Sentiment Rank of 100 (better than 100% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock TransAlta is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for TransAlta. Analyst Opinions are at a rank of 88 (better than 88% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. Analyst Opinions Change is also positive with a rank of 86, which means that stock research experts are changing their opinions for the better and recommending investing in the company. They are getting more optimistic about stock investments in TransAlta. The Professional Investors rank is 83, which means that currently, professional investors hold more stock in this company than in 83% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 86 which means that the current professional news and professional social networks are on the positive side when discussing this company (more positive news than for 86% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 100 (more positive than 100% compared with investment alternatives), TransAlta has a reputation among professional investors that is significantly higher than that of its competitors. Since all market sentiment indicators are positive, the professional community highly recommends investment in the company. Does this mean TransAlta stocks are a safe investment? Far from it. Even professionals make mistakes. Especially in stock investing, there is a tendency to follow the leaders. Since trees don't grow to the heavens, such positive sentiment may also be interpreted as a danger sign. A lot of optimism can often be a sign of troubles to come, albeit unforeseen by most. ...read more
Value Strategy: TransAlta Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 35 (worse than 65% compared with alternatives), TransAlta shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, where half the indicators are below and half are above average for TransAlta. Price-to-Sales (P/S) is 92, which means that the stock price compared with what market professionals expect for future sales is lower than for 92% of comparable companies, indicating a good value concerning TransAlta's revenue size. The same is valid for expected Price-to-Profits (or Price / Earnings, P/E), more favorable than for 83% of alternatives. It is also positive for expected dividend yields with a Dividend Yield rank of 7 (dividends are expected to be higher than for 7% of other stocks). But, compared with other companies in the same industry, the Price-to-Book Capital ratio (also referred to as market-to-book ratio) is higher than average, making the stock more expensive. Only 99% of all competitors have an even higher price compared with book capital which puts the Price-to-Capital Rank for TransAlta to 1. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 35, is a hold recommendation based on TransAlta's stock price compared with the company's operational size and dividend yields. A low level of book capital means that the company has a business that is leaner on assets than its competitors. For instance, the company could be leasing its production facilities, or be more focussed on intellectual property, such as its brand and software, which is less visible in its book capital. If that is the case, the low Dividend Yield is also explained as such companies tend to invest their income into market development. The other good value ranks for Sales and Profits are encouraging indicators for the stock price value. ...read more
Growth Strategy: TransAlta Growth Momentum negative
ANALYSIS: With an Obermatt Growth Rank of 19 (better than 19% compared with alternatives), TransAlta shows one of the most restricted growth dynamics in its industry. There is little momentum in this company. The Growth Rank is based on consolidating four value indicators, with three out of four metrics below average for TransAlta. While Profit Growth has a good rank of 100, as professionals currently expect the company to grow its profits more than 100% of its competitors, all other growth indicators are below market averages. Sales Growth has a rank of 1, which means that currently professionals expect the company to grow less than 99% of its competitors, while Capital Growth has a rank of 1 and Stock Returns have been below market median, with a rank of 49 (51% of alternative investments were better). ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 19, is a sell recommendation for growth and momentum investors. While revenue growth and capital growth are good growth momentum indicators, profit is less reliable, because profits may increase due to cost-cutting measures which typically indicate negative growth momentum. "You can save a dollar only once" is the saying about such situations. Growth Investors should look at company priorities closely if they are interested in growth, because the increase in profits is not usually an indicator of growth, and stock prices have been below market, too. ...read more
Safety Strategy: TransAlta Debt Financing Safety above-average
| SAFETY METRICS | July 27, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 12 |
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| REFINANCING | ||||||||
| REFINANCING | 100 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 42 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 57 |
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ANALYSIS: With an Obermatt Safety Rank of 57 (better than 57% compared with alternatives), the company TransAlta has financing practices on the safer side, which mean that their overall debt burden is lower than average. This doesn't mean that the business of TransAlta is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with just one indicator above average for TransAlta and the other two below average. Refinancing is at 100, meaning the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 100% of its competitors. But Leverage is high with a rank of 12, meaning the company has an above-average debt-to-equity ratio. It has more debt than 88% of its competitors. Liquidity is also on the riskier side with a rank of 42, meaning the company generates less profit to service its debt than 58% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 57 (better than 57% compared with alternatives), TransAlta has a financing structure that is safer than that of its competitors. A good Refinancing Rank means that the problems of the company may not be around the corner. But high Leverage is only good if things go well, and low Liquidity is a signal for caution. The financing signals for TransAlta are on the riskier side, requiring the company's future to be on the safer side. Investors may want to look at Growth and Sentiment ranks before making an investment decision. ...read more
Combined financial peformance: TransAlta Lowest Financial Performance
| COMBINED PERFORMANCE | July 27, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 35 |
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| GROWTH | ||||||||
| GROWTH | 19 |
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| SAFETY | ||||||||
| SAFETY | 42 |
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| COMBINED | ||||||||
| COMBINED | 21 |
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ANALYSIS: With an Obermatt Combined Rank of 21 (worse than 79% compared with investment alternatives), TransAlta (Power Producers & Traders, Canada) shares have lower financial characteristics compared with similar stocks. Shares of TransAlta are low in value (priced high) with a consolidated Value Rank of 35 (worse than 65% of alternatives) and show below-average growth (Growth Rank of 19) but are safely financed (Safety Rank of 57), which means low debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 21, is a sell recommendation based on TransAlta's financial characteristics. As the company TransAlta's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 35) and low growth (Obermatt Growth Rank of 19), it is a somewhat questionable stock investment, where the risk of paying too much for the shares is significant, unless the company has an exceptionally bright future. In this case, good financing practices (Obermatt Safety Rank of 57) are a positive sign, because it may allow the company to weather challenging times until the hoped-for cash flows materialize. This may be true for high-tech or biotechnology companies with enough cash to sustain prolonged business development. If they own properties that only provide cash flows in the future, the stock may look excessively expensive and unattractive today. In such cases, the Obermatt Method has limited value, as it is based on facts we can observe today. If the facts lie all in the future, stock investing becomes guesswork, and this should only be a driver in a limited number of investments that account for a small fraction of a safe portfolio. ...read more
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