TransAlta: Is the Stock Undervalued Following Recent Share Price Gains?

TransAlta's stock has seen significant momentum over the past year, with a 44% increase in price and a 25% gain in the past three months. Despite revenue dipping, net income growth has soared annually. Analysts believe the stock is undervalued, driven by confidence in long-term growth drivers and profitability improvements. The SWS DCF model also suggests the stock is undervalued, indicating the market may be missing something. However, regulatory uncertainty and delays in securing new data center contracts could impact future growth.

TransAlta Corporation (TAC) has seen its stock price surge significantly over the past year, with a 44% increase in price and a 25% gain in the past three months. Despite a dip in revenue, the company has reported robust net income growth annually. This performance has led analysts to believe that the stock is undervalued, driven by confidence in long-term growth drivers and profitability improvements. The SWS Discounted Cash Flow (DCF) model further suggests that the stock is undervalued, indicating that the market may be missing something TransAlta Stock Price, News & Analysis^[1].

The company's strong financial performance is reflected in its second quarter 2025 results, where TransAlta reported an Adjusted EBITDA of $349 million, up from $316 million in Q2 2024. The company also achieved operational availability of 91.6% and Free Cash Flow of $177 million ($0.60 per share) . These results come despite a net loss of $112 million ($0.38 per share) compared to net earnings of $56 million in Q2 2024, highlighting the company's resilience and strategic planning.

TransAlta's growth is expected to be driven by its diversified portfolio, which includes renewable and conventional energy sources. The company has achieved significant environmental milestones, including a 70% reduction in GHG emissions since 2015 and an upgraded MSCI ESG rating of AA . However, regulatory uncertainty and delays in securing new data center contracts could impact future growth.

The company has also taken steps to enhance shareholder value through strategic capital allocation. TransAlta has implemented a new Normal Course Issuer Bid (NCIB) program to repurchase up to 14 million common shares, representing approximately 4.7% of outstanding shares . This program, which runs from May 31, 2025, to May 30, 2026, is designed to enhance shareholder value when share prices do not reflect underlying value.

Investors should also note that TransAlta has declared dividends for both common shares and preferred shares. The company will pay a quarterly dividend of $0.065 per common share on October 1, 2025, to shareholders of record as of September 1, 2025 . Dividends for preferred shares range from 2.877% to 6.894%, with payment dates set for September 30, 2025.

In conclusion, TransAlta's stock has shown strong momentum, driven by robust financial performance and strategic initiatives. However, regulatory uncertainty and delays in securing new contracts could impact future growth. Investors should continue to monitor these developments closely.