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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
TransAlta (TAC) is a stock many investors are watching right now. TAC is currently sporting a Zacks Rank of #2 (Buy) and an A for Value.
We should also highlight that TAC has a P/B ratio of 0.65. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.75. TAC's P/B has been as high as 1 and as low as 0.45, with a median of 0.80, over the past year.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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 0.7. This compares to its industry's average P/S of 1.74.
Finally, we should also recognize that TAC has a P/CF ratio of 2.62. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 7.58. Within the past 12 months, TAC's P/CF has been as high as 6.63 and as low as 1.81, with a median of 3.96.
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.
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