Critical Survey: Avista (NYSE:AVA) & TransAlta (NYSE:TAC)

Avista (NYSE:AVA) and TransAlta (NYSE:TAC) are both mid-cap utilities companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, institutional ownership, valuation, earnings, analyst recommendations, risk and profitability.

Earnings and Valuation

This table compares Avista and TransAlta”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Avista	$1.92 billion	1.79	$193.00 million	$2.51	16.53
TransAlta	$1.72 billion	2.46	-$98.77 million	($0.54)	-26.38

Avista has higher revenue and earnings than TransAlta. TransAlta is trading at a lower price-to-earnings ratio than Avista, indicating that it is currently the more affordable of the two stocks.

Dividends

Avista pays an annual dividend of $1.97 per share and has a dividend yield of 4.7%. TransAlta pays an annual dividend of $0.19 per share and has a dividend yield of 1.3%. Avista pays out 78.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. TransAlta pays out -35.2% of its earnings in the form of a dividend. Avista has raised its dividend for 23 consecutive years and TransAlta has raised its dividend for 2 consecutive years. Avista is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent recommendations for Avista and TransAlta, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Avista	0	6	1	0	2.14
TransAlta	1	1	7	0	2.67

Avista presently has a consensus target price of $40.00, suggesting a potential downside of 3.57%. TransAlta has a consensus target price of $21.33, suggesting a potential upside of 49.76%. Given TransAlta’s stronger consensus rating and higher probable upside, analysts plainly believe TransAlta is more favorable than Avista.

Profitability

This table compares Avista and TransAlta’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Avista	10.75%	7.65%	2.50%
TransAlta	-9.46%	9.52%	0.66%

Institutional & Insider Ownership

85.2% of Avista shares are owned by institutional investors. Comparatively, 59.0% of TransAlta shares are owned by institutional investors. 0.8% of Avista shares are owned by insiders. Comparatively, 13.1% of TransAlta shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Volatility & Risk

Avista has a beta of 0.24, suggesting that its stock price is 76% less volatile than the S&P 500. Comparatively, TransAlta has a beta of 0.66, suggesting that its stock price is 34% less volatile than the S&P 500.

Summary

Avista beats TransAlta on 9 of the 17 factors compared between the two stocks.

About Avista

Avista Corporation, together with its subsidiaries, operates as an electric and natural gas utility company. It operates in two segments, Avista Utilities and AEL&P. The Avista Utilities segment provides electric distribution and transmission, and natural gas distribution services in parts of eastern Washington and northern Idaho; and natural gas distribution services in parts of northeastern and southwestern Oregon, as well as generates electricity in Washington, Idaho, Oregon, and Montana. This segment also engages in the supply of electricity to customers in Montana; and wholesale purchase and sale of electricity and natural gas. The AEL&P segment offers electric services in Juneau, Alaska. The company generates electricity through hydroelectric, thermal, wind, and solar generation facilities. As of December 31, 2023, it supplied retail electric services to approximately 416,000 customers; and retail natural gas services to approximately 381,000 customers. The company also operates five hydroelectric generation facilities with capacity of 102.7 MW; and four diesel generating facilities with a capacity of 107.5 MW. It also engages in venture fund investments, real estate investments, and other investments. Avista Corporation was incorporated in 1889 and is headquartered in Spokane, Washington.

About TransAlta

TransAlta Corporation engages in the development, production, and sale of electric energy. It operates through Hydro, Wind and Solar, Gas, Energy Transition, and Energy Marketing segments. The Hydro segment holds interest of approximately 922 megawatts (MW) of owned hydroelectric generating capacity located in Alberta, British Columbia, and Ontario. The Wind and Solar segment has a net ownership interest of approximately 2,057 MW of owned wind and solar electrical-generating capacity, as well as battery storage facilities located in Alberta, Ontario, New Brunswick, and Québec in Canada; the states of Massachusetts, Minnesota, New Hampshire, North Carolina, Pennsylvania, Washington, and Wyoming in the United States; and the state of Western Australia. The Gas segment has a net ownership interest of approximately 2,775 MW of owned gas electrical-generating capacity, and facilities located in Alberta, Ontario, Michigan, and the state of Western Australia. The Energy Transition segment has a net ownership interest of approximately 671 MW of owned coal electrical-generating capacity, as well as operates the Skookumchuck hydro facility in Centralia; and engages in the highvale mine and the mine reclamation activities. The Energy Marketing segment is involved in the trading of power, natural gas, and environmental products. It serves customers in various industry segments, including commercial real estate, municipal, manufacturing, industrial, hospitality, finance, and oil and gas. TransAlta Corporation was founded in 1909 and is headquartered in Calgary, Canada.