Is There Now An Opportunity In TransAlta Renewables Inc. (TSE:RNW)?

TransAlta Renewables Inc. (TSE:RNW), which is in the renewable energy business, and is based in Canada, saw a double-digit share price rise of over 10% in the past couple of months on the TSX. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on TransAlta Renewables’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for TransAlta Renewables

What is TransAlta Renewables worth?

Good news, investors! TransAlta Renewables is still a bargain right now. According to my valuation, the intrinsic value for the stock is CA$25.52, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, TransAlta Renewables’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from TransAlta Renewables?

TSX:RNW Past and Future Earnings, January 15th 2020
TSX:RNW Past and Future Earnings, January 15th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -12% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for TransAlta Renewables. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although RNW is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to RNW, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on RNW for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on TransAlta Renewables. You can find everything you need to know about TransAlta Renewables in the latest infographic research report. If you are no longer interested in TransAlta Renewables, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.