Analyzing Clearway Energy (NYSE:CWEN) and TransAlta (NYSE:TAC)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
TransAlta	-2.76%	8.85%	0.66%
Clearway Energy	5.78%	1.60%	0.55%

Earnings and Valuation

This table compares TransAlta and Clearway Energy”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
TransAlta	$1.72 billion	2.45	-$98.77 million	($0.18)	-74.08
Clearway Energy	$1.43 billion	5.13	$169.00 million	$0.76	46.98

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

Institutional and Insider Ownership

59.0% of TransAlta shares are held by institutional investors. Comparatively, 84.5% of Clearway Energy shares are held by institutional investors. 13.1% of TransAlta shares are held by insiders. Comparatively, 0.5% of Clearway Energy shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of recent recommendations and price targets for TransAlta and Clearway Energy, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
TransAlta	0	2	6	1	2.89
Clearway Energy	0	1	7	2	3.10

TransAlta presently has a consensus target price of $24.50, suggesting a potential upside of 83.73%. Clearway Energy has a consensus target price of $42.00, suggesting a potential upside of 17.62%. Given TransAlta’s higher possible upside, research analysts clearly believe TransAlta is more favorable than Clearway Energy.

Risk & Volatility

TransAlta has a beta of 0.73, meaning that its share price is 27% less volatile than the S&P 500. Comparatively, Clearway Energy has a beta of 0.81, meaning that its share price is 19% less volatile than the S&P 500.

Dividends

TransAlta pays an annual dividend of $0.20 per share and has a dividend yield of 1.5%. Clearway Energy pays an annual dividend of $1.90 per share and has a dividend yield of 5.3%. TransAlta pays out -111.1% of its earnings in the form of a dividend. Clearway Energy pays out 250.0% 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 has raised its dividend for 2 consecutive years and Clearway Energy has raised its dividend for 2 consecutive years.

Summary

Clearway Energy beats TransAlta on 11 of the 17 factors compared between the two stocks.

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.

About Clearway Energy

Clearway Energy, Inc. operates in the renewable energy business in the United States. The company operates through Conventional and Renewables segments. It has approximately 6,000 net MW of installed wind, solar, and energy generation projects; and approximately 2,500 net MW of natural gas-fired generation facilities. The company was formerly known as NRG Yield, Inc. and changed its name to Clearway Energy, Inc. in August 2018. Clearway Energy, Inc. was incorporated in 2012 and is based in Princeton, New Jersey. Clearway Energy, Inc. is a subsidiary of Clearway Energy Group LLC.