TA.TO
TRANSALTA CORPORATIONClosedTA.TO discounted cash flow valuation
TA.TO Fair Value
Reverse DCF: today's price implies 1.0% a year of FCF growth for years 1–5, against 10.0% in this model.
Model: 10.0% from analyst next-year revenue growth. Fades linearly to terminal growth by year 10.
Model: 7.19% (CAPM, see the build-up).
Long-run growth after year 10; keep it at or below nominal GDP.
Value Bridge
| PV of free cash flow, years 1–10 | CAD 4.90B |
|---|---|
| PV of terminal value (70% of EV) | CAD 11.63B |
| Enterprise value | CAD 16.52B |
| + Cash & investments | CAD 302.00M |
| − Total debt | −CAD 4.24B |
| Equity value | CAD 12.59B |
| ÷ Shares outstanding | 316.30M |
| Value per share | CAD 39.79 |
| Market cap | CAD 5.71B |
Discount Rate Build-up
| Risk-free rate (10-yr Treasury) | 5.19% |
|---|---|
| Beta (adjusted toward 1) | 0.67 |
| Equity risk premium | 4.50% |
| Cost of equity (CAPM) | 8.18% |
| Pre-tax cost of debt | 6.28% |
| Tax rate | 26.0% |
| Debt / (equity + debt) | 42.6% |
| WACC | 7.19% |
Beta is Yahoo's, held between 0.5 and 2.5, then moved a third of the way toward 1. Cost of debt is interest expense ÷ total debt, held between the risk-free rate and 12%. WACC is at least the risk-free rate plus 2%, which applies here.
Free Cash Flow: History and Projection
Sensitivity: Value per Share
| WACC ↓ / g → | 2.00% | 2.50% | 3.00% | 3.50% | 4.00% |
|---|---|---|---|---|---|
| 5.19% | 60.73 | 72.51 | 89.67 | 116.97 | 167.22 |
| 6.19% | 42.60 | 48.78 | 56.89 | 68.02 | 84.22 |
| 7.19% | 31.49 | 35.20 | 39.79 | 45.63 | 53.30 |
| 8.19% | 23.98 | 26.41 | 29.30 | 32.81 | 37.16 |
| 9.19% | 18.59 | 20.27 | 22.22 | 24.52 | 27.25 |
Green is above today's price, red below (full colour at ±30%). The outlined centre cell is the current inputs.
Projected Cash Flows
| Year | Growth | Free cash flow | Discount factor | Present value |
|---|---|---|---|---|
| Base (TTM) | — | CAD 444.00M | — | — |
| Year 1 | 10.0% | CAD 488.40M | 0.933 | CAD 455.64M |
| Year 2 | 10.0% | CAD 537.24M | 0.870 | CAD 467.58M |
| Year 3 | 10.0% | CAD 590.96M | 0.812 | CAD 479.84M |
| Year 4 | 10.0% | CAD 650.06M | 0.758 | CAD 492.42M |
| Year 5 | 10.0% | CAD 715.07M | 0.707 | CAD 505.33M |
| Year 6 | 8.6% | CAD 776.56M | 0.659 | CAD 511.98M |
| Year 7 | 7.2% | CAD 832.47M | 0.615 | CAD 512.02M |
| Year 8 | 5.8% | CAD 880.76M | 0.574 | CAD 505.39M |
| Year 9 | 4.4% | CAD 919.51M | 0.535 | CAD 492.23M |
| Year 10 | 3.0% | CAD 947.10M | 0.499 | CAD 472.99M |
Method
Two-stage free-cash-flow model, the same as the bot's lgf dcf: five years at the chosen growth rate, a straight-line fade to terminal growth by year ten, then a Gordon-growth terminal value. Everything is discounted at WACC.
Base cash flow is the trailing four quarters of operating cash flow minus capital expenditure (the latest fiscal year when quarters are missing). Default growth uses analyst long-term growth when Yahoo publishes it, else next year's revenue growth (steadier than one year's EPS), else next year's EPS growth, else revenue CAGR, held between −2% and 25%. Terminal growth defaults to 3%.
A DCF is only as good as its inputs. The terminal value is usually most of the answer, so read the sensitivity grid before the headline number. This is a model, not investment advice.