Should Value Investors Buy TransAlta (TAC) Stock?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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.
One company to watch right now is TransAlta (TAC). TAC is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 13.82, which compares to its industry's average of 14.80. Over the past 52 weeks, TAC's Forward P/E has been as high as 25.55 and as low as 9.17, with a median of 15.51.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. TAC has a P/S ratio of 1.04. This compares to its industry's average P/S of 1.91.
Finally, our model also underscores that TAC has a P/CF ratio of 4.37. 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 stock's P/CF looks attractive against its industry's average P/CF of 12.81. Over the past 52 weeks, TAC's P/CF has been as high as 23.17 and as low as 3.84, with a median of 4.59.
Investors could also keep in mind Vistra (VST), an Utility - Electric Power stock with a Zacks Rank of # 2 (Buy) and Value grade of A.
Furthermore, Vistra holds a P/B ratio of 3.06 and its industry's price-to-book ratio is 2.25. VST's P/B has been as high as 3.62, as low as 2.43, with a median of 2.95 over the past 12 months.
These are only a few of the key metrics included in TransAlta and Vistra strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, TAC and VST look like an impressive value stock at the moment.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
TransAlta Corporation (TAC) : Free Stock Analysis Report
Vistra Corp. (VST) : Free Stock Analysis Report
