TransAlta Corp Current Financial Leverage
| TAC Stock | USD 6.45 0.02 0.31% |
TransAlta Corp holds a debt-to-equity ratio of 1.582. At present, TransAlta Corp's Interest Debt Per Share is projected to slightly decrease based on the last few years of reporting. The current year's Debt Equity Ratio is expected to grow to 2.78, whereas Short and Long Term Debt Total is forecasted to decline to about 3.7 B. TransAlta Corp's financial risk is the risk to TransAlta Corp stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
TransAlta Corp's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. TransAlta Corp's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps TransAlta Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect TransAlta Corp's stakeholders.
TransAlta Corp Quarterly Net Debt |
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For most companies, including TransAlta Corp, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running TransAlta Corp the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
Price Book 4.2879 | Book Value 1.939 | Operating Margin 0.0321 | Profit Margin 0.2072 | Return On Assets 0.0692 |
Given that TransAlta Corp's debt-to-equity ratio measures a Company's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which TransAlta Corp is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of TransAlta Corp to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, TransAlta Corp is said to be less leveraged. If creditors hold a majority of TransAlta Corp's assets, the Company is said to be highly leveraged.
At present, TransAlta Corp's Interest Debt Per Share is projected to slightly decrease based on the last few years of reporting. The current year's Debt Equity Ratio is expected to grow to 2.78, whereas Short and Long Term Debt Total is forecasted to decline to about 3.7 B. TransAlta |
TransAlta Corp Financial Leverage Rating
TransAlta Corp bond ratings play a critical role in determining how much TransAlta Corp have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for TransAlta Corp's borrowing costs.| Piotroski F Score | 7 Strong |
| Beneish M Score | -1.85 Possible Manipulator |
TransAlta Corp Debt to Cash Allocation
As TransAlta Corp follows its natural business cycle, the capital allocation decisions will not magically go away. TransAlta Corp's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The company has 4.21 B in debt with debt to equity (D/E) ratio of 1.58, which is OK given its current industry classification. TransAlta Corp has a current ratio of 1.1, demonstrating that it may have difficulties to pay its financial commitments when the payables are due. Debt can assist TransAlta Corp until it has trouble settling it off, either with new capital or with free cash flow. So, TransAlta Corp's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like TransAlta Corp sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for TransAlta to invest in growth at high rates of return. When we think about TransAlta Corp's use of debt, we should always consider it together with cash and equity.TransAlta Corp Common Stock Shares Outstanding Over Time
TransAlta Corp Assets Financed by Debt
Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the TransAlta Corp's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of TransAlta Corp, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a TransAlta Corp debt ratio should be compared their industry average or other competing firms.TransAlta Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning TransAlta Corp Use of Financial Leverage
TransAlta Corp financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures TransAlta Corp's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of TransAlta Corp assets, the company is considered highly leveraged. Understanding the composition and structure of overall TransAlta Corp debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it. Financial leverage can amplify the potential profits to TransAlta Corp's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of TransAlta Corp's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 4.2 B | 3.7 B | |
| Net Debt | 3.8 B | 3.5 B | |
| Short Term Debt | 535 M | 367.7 M | |
| Long Term Debt | 3.5 B | 3.1 B | |
| Short and Long Term Debt | 529 M | 380 M | |
| Long Term Debt Total | 4.8 B | 3.8 B | |
| Net Debt To EBITDA | 1.46 | 1.39 | |
| Debt To Equity | 2.65 | 2.78 | |
| Interest Debt Per Share | 15.82 | 17.49 | |
| Debt To Assets | 0.47 | 0.43 | |
| Long Term Debt To Capitalization | 0.70 | 0.43 | |
| Total Debt To Capitalization | 0.73 | 0.46 | |
| Debt Equity Ratio | 2.65 | 2.78 | |
| Debt Ratio | 0.47 | 0.43 | |
| Cash Flow To Debt Ratio | 0.36 | 0.38 |
TransAlta Corp Investors Sentiment
The influence of TransAlta Corp's investor sentiment on the probability of its price appreciation or decline could be a good factor in your decision-making process regarding taking a position in TransAlta. The overall investor sentiment generally increases the direction of a stock movement in a one-year investment horizon. However, the impact of investor sentiment on the entire stock market does not have solid backing from leading economists and market statisticians.
Investor biases related to TransAlta Corp's public news can be used to forecast risks associated with an investment in TransAlta. The trend in average sentiment can be used to explain how an investor holding TransAlta can time the market purely based on public headlines and social activities around TransAlta Corp. Please note that most equities that are difficult to arbitrage are affected by market sentiment the most.
TransAlta Corp's market sentiment shows the aggregated news analyzed to detect positive and negative mentions from the text and comments. The data is normalized to provide daily scores for TransAlta Corp's and other traded tickers. The bigger the bubble, the more accurate is the estimated score. Higher bars for a given day show more participation in the average TransAlta Corp's news discussions. The higher the estimated score, the more favorable is the investor's outlook on TransAlta Corp.
Some investors attempt to determine whether the market's mood is bullish or bearish by monitoring changes in market sentiment. Unlike more traditional methods such as technical analysis, investor sentiment usually refers to the aggregate attitude towards TransAlta Corp in the overall investment community. So, suppose investors can accurately measure the market's sentiment. In that case, they can use it for their benefit. For example, some tools to gauge market sentiment could be utilized using contrarian indexes, TransAlta Corp's short interest history, or implied volatility extrapolated from TransAlta Corp options trading.
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When determining whether TransAlta Corp offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of TransAlta Corp's financial statements, including income statements, balance sheets, and cash flow statements, to assess its financial health. Key financial ratios are used to gauge profitability, efficiency, and growth potential of Transalta Corp Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Transalta Corp Stock:Check out the analysis of TransAlta Corp Fundamentals Over Time. For information on how to trade TransAlta Stock refer to our How to Trade TransAlta Stock guide.Note that the TransAlta Corp information on this page should be used as a complementary analysis to other TransAlta Corp's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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When running TransAlta Corp's price analysis, check to measure TransAlta Corp's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy TransAlta Corp is operating at the current time. Most of TransAlta Corp's value examination focuses on studying past and present price action to predict the probability of TransAlta Corp's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move TransAlta Corp's price. Additionally, you may evaluate how the addition of TransAlta Corp to your portfolios can decrease your overall portfolio volatility.
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Is TransAlta Corp's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of TransAlta Corp. If investors know TransAlta will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about TransAlta Corp listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth 5.284 | Dividend Share 0.22 | Earnings Share 1.69 | Revenue Per Share 12.156 | Quarterly Revenue Growth (0.27) |
The market value of TransAlta Corp is measured differently than its book value, which is the value of TransAlta that is recorded on the company's balance sheet. Investors also form their own opinion of TransAlta Corp's value that differs from its market value or its book value, called intrinsic value, which is TransAlta Corp's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because TransAlta Corp's market value can be influenced by many factors that don't directly affect TransAlta Corp's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between TransAlta Corp's value and its price as these two are different measures arrived at by different means. Investors typically determine if TransAlta Corp is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, TransAlta Corp's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.
What is Financial Leverage?
Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.Leverage and Capital Costs
The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.Benefits of Financial Leverage
Leverage provides the following benefits for companies:- Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
- It provides a variety of financing sources by which the firm can achieve its target earnings.
- Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.