TSX:RNW

Stock Analysis Report

TransAlta Renewables

Executive Summary

TransAlta Renewables Inc. develops, owns, and operates renewable power generation facilities.

Rewards

Trading at 38.2% below its fair value

Earnings grew by 27.3% over the past year

Risk Analysis

Earnings are forecast to decline by an average of -0.8% per year for the next 3 years

Dividend of 5.96% is not well covered by earnings or forecast to be in the next 3 years

Large one-off items impacting financial results

Shareholders have been diluted in the past year



Snowflake Analysis

Excellent balance sheet with proven track record.


Similar Companies

Share Price & News

How has TransAlta Renewables's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: RNW has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

2.5%

RNW

3.3%

CA Renewable Energy

1.4%

CA Market


1 Year Return

42.5%

RNW

30.4%

CA Renewable Energy

10.1%

CA Market

Return vs Industry: RNW exceeded the Canadian Renewable Energy industry which returned 29.1% over the past year.

Return vs Market: RNW exceeded the Canadian Market which returned 10.4% over the past year.


Shareholder returns

RNWIndustryMarket
7 Day2.5%3.3%1.4%
30 Day3.3%3.9%2.6%
90 Day14.4%13.2%6.5%
1 Year52.5%42.5%36.6%30.4%13.7%10.1%
3 Year34.5%9.0%42.0%22.9%17.8%7.1%
5 Year78.7%26.1%73.9%34.8%36.3%16.3%

Price Volatility Vs. Market

How volatile is TransAlta Renewables's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is TransAlta Renewables undervalued compared to its fair value and its price relative to the market?

36.6%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: RNW (CA$15.77) is trading below our estimate of fair value (CA$25.52)

Significantly Below Fair Value: RNW is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: RNW is poor value based on its PE Ratio (19x) compared to the Renewable Energy industry average (19x).

PE vs Market: RNW is poor value based on its PE Ratio (18.6x) compared to the Canadian market (15.8x).


Price to Earnings Growth Ratio

PEG Ratio: RNW's earnings are forecast to decline next year, so we can't calculate its PEG ratio.


Price to Book Ratio

PB vs Industry: RNW is good value based on its PB Ratio (1.9x) compared to the CA Renewable Energy industry average (1.9x).


Next Steps

Future Growth

How is TransAlta Renewables forecast to perform in the next 1 to 3 years based on estimates from 4 analysts?

-0.8%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: RNW's earnings are forecast to decline over the next 3 years (-0.8% per year).

Earnings vs Market: RNW's earnings are forecast to decline over the next 3 years (-0.8% per year).

High Growth Earnings: RNW's earnings are forecast to decline over the next 3 years.

Revenue vs Market: RNW's revenue (3.1% per year) is forecast to grow slower than the Canadian market (5% per year).

High Growth Revenue: RNW's revenue (3.1% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: RNW's Return on Equity is forecast to be low in 3 years time (9.8%).


Next Steps

Past Performance

How has TransAlta Renewables performed over the past 5 years?

26.0%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: RNW has a large one-off gain of CA$67.0M impacting its September 30 2019 financial results.

Growing Profit Margin: RNW's current net profit margins (49%) are higher than last year (40.2%).


Past Earnings Growth Analysis

Earnings Trend: RNW's earnings have grown significantly by 26% per year over the past 5 years.

Accelerating Growth: RNW's earnings growth over the past year (27.3%) exceeds its 5-year average (26% per year).

Earnings vs Industry: RNW earnings growth over the past year (27.3%) exceeded the Renewable Energy industry -28.4%.


Return on Equity

High ROE: RNW's Return on Equity (9.8%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is TransAlta Renewables's financial position?


Financial Position Analysis

Short Term Liabilities: RNW's short term assets (CA$282.0M) exceed its short term liabilities (CA$158.0M).

Long Term Liabilities: RNW's short term assets (CA$282.0M) do not cover its long term liabilities (CA$1.2B).


Debt to Equity History and Analysis

Debt Level: RNW's debt to equity ratio (38.6%) is considered satisfactory.

Reducing Debt: RNW's debt to equity ratio has reduced from 62.7% to 38.6% over the past 5 years.

Debt Coverage: RNW's debt is well covered by operating cash flow (40.2%).

Interest Coverage: RNW earns more interest than it pays, so coverage of interest payments is not a concern.


Balance Sheet

Inventory Level: RNW has a high level of physical assets or inventory.

Debt Coverage by Assets: RNW's debt is not covered by short term assets (assets are 0.3x debt).


Next Steps

Dividend

What is TransAlta Renewables's current dividend yield, its reliability and sustainability?

5.81%

Current Dividend Yield


Upcoming Dividend Payment

Purchase TransAlta Renewables before the 'Buy Limit' to receive their next dividend payment.


Dividend Yield vs Market

company5.8%marketbottom25%1.9%markettop25%5.4%industryaverage4.2%forecastin3Years5.8%

Current dividend yield vs market & industry

Notable Dividend: RNW's dividend (5.96%) is higher than the bottom 25% of dividend payers in the Canadian market (1.88%).

High Dividend: RNW's dividend (5.96%) is in the top 25% of dividend payers in the Canadian market (5.48%)


Stability and Growth of Payments

Stable Dividend: Whilst dividend payments have been stable, RNW has been paying a dividend for less than 10 years.

Growing Dividend: RNW's dividend payments have increased, but the company has only paid a dividend for 6 years.


Current Payout to Shareholders

Dividend Coverage: With its high payout ratio (110.7%), RNW's dividend payments are not well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: RNW's dividends in 3 years are not forecast to be well covered by earnings (93.8% payout ratio).


Next Steps

Management

What is the CEO of TransAlta Renewables's salary, the management and board of directors tenure and is there insider trading?

2.2yrs

Average management tenure


CEO

John Kousinioris (54yo)

2.2yrs

Tenure

CA$675,466

Compensation

Mr. John Harry Kousinioris has been the Chief Growth Officer at TransAlta Corporation since 2018 and Chief Operating Officer since August 2019. Mr. Kousinioris has been President and Director of TransAlta  ...


CEO Compensation Analysis

Compensation vs Market: John's total compensation ($USD517.71K) is below average for companies of similar size in the Canadian market ($USD2.87M).

Compensation vs Earnings: John's compensation has been consistent with company performance over the past year.


Management Age and Tenure

2.2yrs

Average Tenure

Experienced Management: RNW's management team is considered experienced (2.2 years average tenure).


Board Age and Tenure

6.6yrs

Average Tenure

63.5yo

Average Age

Experienced Board: RNW's board of directors are considered experienced (6.6 years average tenure).


Insider Trading

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

SellCA$27,80012 Jun 19
Todd Stack
EntityIndividual
Shares2,000
Max PriceCA$13.90
SellCA$137,40007 Jun 19
Allen Hagerman
EntityIndividual
Role
Chairman of the Board
Chairman of the Board
Shares10,000
Max PriceCA$13.74
SellCA$205,35016 May 19
Allen Hagerman
EntityIndividual
Role
Chairman of the Board
Chairman of the Board
Shares15,000
Max PriceCA$13.69

Ownership Breakdown

Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 3.9%.


Management Team

  • John Kousinioris (54yo)

    President & Corporate Director

    • Tenure: 2.2yrs
    • Compensation: CA$675.47k
  • Brent Ward

    Chief Financial Officer

    • Tenure: 1yrs
    • Compensation: CA$114.51k
  • Aron Willis (44yo)

    Senior Vice President of Growth

    • Tenure: 3yrs
    • Compensation: CA$323.01k
  • Scott Jeffers

    Corporate Secretary

    • Tenure: 2.2yrs
    • Compensation: CA$86.96k
  • Sally Taylor

    Manager of Investor Relations

    • Kat Higgins

      MD & Corporate Controller

      • Tenure: 1yrs

    Board Members

    • Kathryn A. McQuade (63yo)

      Corporate Director

      • Tenure: 6.6yrs
      • Compensation: CA$154.00k
    • Allen Hagerman (68yo)

      Chairman of the Board

      • Tenure: 7yrs
      • Compensation: CA$184.50k
    • David Drinkwater (70yo)

      Corporate Director

      • Tenure: 6.6yrs
      • Compensation: CA$149.00k
    • Paul H. Taylor (64yo)

      Corporate Director

      • Tenure: 6.6yrs
      • Compensation: CA$116.50k
    • John Kousinioris (54yo)

      President & Corporate Director

      • Tenure: 2.2yrs
      • Compensation: CA$675.47k
    • Brett Gellner (55yo)

      Corporate Director

      • Tenure: 6.7yrs

    Company Information

    TransAlta Renewables Inc.'s company bio, employee growth, exchange listings and data sources


    Key Information

    • Name: TransAlta Renewables Inc.
    • Ticker: RNW
    • Exchange: TSX
    • Founded: 2013
    • Industry: Renewable Electricity
    • Sector: Utilities
    • Market Cap: CA$4.294b
    • Shares outstanding: 265.57m
    • Website: https://www.transaltarenewables.com

    Location

    • TransAlta Renewables Inc.
    • 110 12th Avenue Southwest
    • PO Box 1900
    • Calgary
    • Alberta
    • T2P 2M1
    • Canada

    Listings

    TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
    RNWTSX (The Toronto Stock Exchange)YesCommon SharesCACADAug 2013
    0TADB (Deutsche Boerse AG)YesCommon SharesDEEURAug 2013
    TRSW.FOTCPK (Pink Sheets LLC)YesCommon SharesUSUSDAug 2013

    Biography

    TransAlta Renewables Inc. develops, owns, and operates renewable power generation facilities. As of March 6, 2019, it owned and operated 21 wind facilities, 13 hydroelectric facilities, 7 natural gas generation facilities, 1 solar facility, and 1 natural gas pipeline comprising an ownership interest of 2,414 megawatts of generating capacity located in the provinces of British Columbia, Alberta, Ontario, Québec, and New Brunswick; and the States of Wyoming, Massachusetts, and Minnesota, as well as the State of Western Australia. The company was founded in 2013 and is headquartered in Calgary, Canada. TransAlta Renewables Inc. is a subsidiary of TransAlta Corporation. 


    Company Analysis and Financial Data Status

    All financial data provided by Standard & Poor's Capital IQ.
    DataLast Updated (UTC time)
    Company Analysis2020/01/21 00:49
    End of Day Share Price2020/01/20 00:00
    Earnings2019/09/30
    Annual Earnings2018/12/31


    Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.