Critical Comparison: Vivint Solar (NYSE:VSLR) and TransAlta Corporation (TAC)

Vivint Solar (NYSE: VSLR) and TransAlta Corporation (NYSE:TAC) are both small-cap oils/energy companies, but which is the better investment? We will compare the two companies based on the strength of their valuation, institutional ownership, profitability, earnings, dividends, risk and analyst recommendations.

Dividends

TransAlta Corporation pays an annual dividend of $0.12 per share and has a dividend yield of 1.9%. Vivint Solar does not pay a dividend. TransAlta Corporation pays out 133.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider & Institutional Ownership

94.5% of Vivint Solar shares are owned by institutional investors. Comparatively, 50.9% of TransAlta Corporation shares are owned by institutional investors. 4.5% of Vivint Solar shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Vivint Solar and TransAlta Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Vivint Solar $209.14 million 2.60 -$60.84 million $0.48 9.90
TransAlta Corporation $1.93 billion 0.92 $733.20 million $0.09 68.90

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

Analyst Recommendations

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Vivint Solar 1 3 1 0 2.00
TransAlta Corporation 0 4 0 0 2.00

Vivint Solar currently has a consensus target price of $5.40, indicating a potential upside of 13.68%. TransAlta Corporation has a consensus target price of $7.00, indicating a potential upside of 12.90%. Given Vivint Solar’s higher probable upside, analysts clearly believe Vivint Solar is more favorable than TransAlta Corporation.

Profitability

This table compares Vivint Solar and TransAlta Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Vivint Solar 26.35% -26.46% -8.14%
TransAlta Corporation 1.67% 1.00% 0.34%

Volatility and Risk

Vivint Solar has a beta of -0.25, indicating that its share price is 125% less volatile than the S&P 500. Comparatively, TransAlta Corporation has a beta of 0.71, indicating that its share price is 29% less volatile than the S&P 500.

Summary

Vivint Solar beats TransAlta Corporation on 8 of the 14 factors compared between the two stocks.

About Vivint Solar

Vivint Solar, Inc. offers distributed solar energy, electricity generated by a solar energy system installed at or near customers’ locations, to residential customers. Through investment funds, the Company owns solar energy systems it installs and provides solar electricity pursuant to long-term contracts with its customers. The Company also sells solar energy systems outright to customers. The Company deploys its direct-to-home sales force to provide in-person professional consultations to prospective customers to evaluate the feasibility of installing a solar energy system at their residence. The Company’s systems use communication gateways and monitoring services to collect performance data. The Company operates in Arizona, California, Connecticut, Florida, Hawaii, Maryland, Massachusetts, New Jersey, New Mexico, New York, Pennsylvania, South Carolina, Texas and Utah. The Company purchases solar panels directly from multiple manufacturers.

About TransAlta Corporation

TransAlta Corporation (TransAlta) is a non-regulated electricity generation and energy marketing company with an aggregate net ownership interest of approximately 8,720 megawatts of generating capacity. The Company is engaged in the production and sale of electric energy. It focuses on generating and marketing electricity in Canada, the United States and Western Australia through its diversified portfolio of facilities fuelled by coal, natural gas, diesel, hydro, wind and solar. TransAlta is organized into eight business segments: Canadian Coal, U.S. Coal, Canadian Gas, Australian Gas, Wind and Solar, Hydro, Energy Marketing and Corporate. The Canadian Coal, U.S. Coal, Canadian Gas, Australian Gas, Wind and Solar, and Hydro segments are responsible for constructing, operating and maintaining its electrical generation. All the segments are supported by a Corporate segment, which includes the Corporation’s central financial, legal, administrative, and investing functions.

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