Financial Comparison: RWE (OTCMKTS:RWEOY) vs. TransAlta (NYSE:TAC)

RWE (OTCMKTS:RWEOY) and TransAlta (NYSE:TAC) are both utilities companies, but which is the better business? We will compare the two businesses based on the strength of their risk, analyst recommendations, dividends, institutional ownership, profitability, valuation and earnings.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
RWE	$19.94 billion	2.36	$3.54 billion	$3.79	17.12
TransAlta	$1.72 billion	2.16	-$98.77 million	($0.54)	-23.08

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
RWE	15.16%	4.93%	1.93%
TransAlta	-9.46%	9.52%	0.66%

Volatility & Risk

RWE has a beta of 0.62, indicating that its share price is 38% less volatile than the S&P 500. Comparatively, TransAlta has a beta of 0.69, indicating that its share price is 31% less volatile than the S&P 500.

Dividends

RWE pays an annual dividend of $1.00 per share and has a dividend yield of 1.5%. TransAlta pays an annual dividend of $0.20 per share and has a dividend yield of 1.6%. RWE pays out 26.4% of its earnings in the form of a dividend. TransAlta pays out -37.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. TransAlta has raised its dividend for 2 consecutive years. TransAlta is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for RWE and TransAlta, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
RWE	0	5	1	0	2.17
TransAlta	1	1	7	0	2.67

RWE presently has a consensus price target of $53.30, suggesting a potential downside of 17.84%. TransAlta has a consensus price target of $22.25, suggesting a potential upside of 78.51%. Given TransAlta’s stronger consensus rating and higher probable upside, analysts clearly believe TransAlta is more favorable than RWE.

Insider and Institutional Ownership

59.0% of TransAlta shares are owned by institutional investors. 13.1% of TransAlta shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

TransAlta beats RWE on 10 of the 17 factors compared between the two stocks.

About RWE

RWE Aktiengesellschaft generates and supplies electricity from renewable and conventional sources in Germany, the United Kingdom, rest of Europe, North America, and internationally. It operates through five segments: Offshore Wind; Onshore Wind/Solar; Hydro/Biomass/Gas; Supply & Trading; and Coal/Nuclear. The company generates wind, hydro, solar, nuclear, gas, and biomass electricity. It also trades in electricity, gas, and energy commodities; operates gas storage facilities; and engages in battery storage activities. The company serves commercial, industrial, and corporate customers. RWE Aktiengesellschaft was founded in 1898 and is headquartered in Essen, Germany.

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.