Back to top

Image: Bigstock

Are Investors Undervaluing TransAlta (TAC) Right Now?

Read MoreHide Full Article

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

TransAlta (TAC - Free Report) is a stock many investors are watching right now. TAC is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 14.32. This compares to its industry's average Forward P/E of 15.42. Over the last 12 months, TAC's Forward P/E has been as high as 17.65 and as low as 4.46, with a median of 12.10.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. TAC has a P/S ratio of 1.12. This compares to its industry's average P/S of 2.08.

Finally, we should also recognize that TAC has a P/CF ratio of 3.18. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 12.28. Within the past 12 months, TAC's P/CF has been as high as 3.43 and as low as 1.99, with a median of 2.35.

These are just a handful of the figures considered in TransAlta's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that TAC is an impressive value stock right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


TransAlta Corporation (TAC) - free report >>

Published in