TAC
TransAlta Corporation
$12.74
Stable Earnings Power
40%
P/Adj-EPS × Normalized Multiple
Mild
·
Conviction
Overvalued
Trading 1.7% above fair value
You pay
$12.74
Bear
$10.25
Fair
$12.53
Bull
$14.82
Bear
$10.25
-19.5%
$0.43 × 18x P/E
Fair
$12.53
-1.7%
$0.43 × 22x P/E
Bull
$14.82
+16.3%
$0.43 × 26x P/E
Key Value Driver
Normalized P/E multiple (22x base case)
Implied Market Multiple
29.8x
Summary
Our base-case estimate uses a valuation based on adjusted earnings per share and a normalized price-to-earnings multiple. We then blend that result with the average analyst price target of $25.00 from 9 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $12.53 per share.
Warnings
Dividend-based valuation: $5.83 (below our primary estimate by 38%). Large gaps may signal the dividend doesn't reflect full earning power.
Wall Street's average price target is $25.00 (from 9 analysts). Our estimate is 62% below the consensus -- consider that gap carefully.
Financial statements were converted from CAD into USD using USDCAD at 0.7092 USD per CAD.
Key Risks
- Growth DCF inappropriate — terminal value assumptions dominate
- EV/EBITDA misleading for regulated businesses where capex is mandated
- Regulatory risk is a fat tail not visible in normal multiples