Head to Head Review: Northland Power (OTCMKTS:NPIFF) & TransAlta (NYSE:TAC)

TransAlta (NYSE:TAC) and Northland Power (OTCMKTS:NPIFF) are both mid-cap utilities companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, analyst recommendations, valuation, institutional ownership, dividends, profitability and risk.

Insider and Institutional Ownership

59.0% of TransAlta shares are owned by institutional investors. 13.1% of TransAlta shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares TransAlta and Northland Power’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%
Northland Power	-5.60%	10.29%	3.31%

Dividends

TransAlta pays an annual dividend of $0.20 per share and has a dividend yield of 1.5%. Northland Power pays an annual dividend of $0.52 per share and has a dividend yield of 3.3%. TransAlta pays out -111.1% of its earnings in the form of a dividend. Northland Power pays out -126.8% 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. Northland Power is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of recent ratings for TransAlta and Northland Power, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
TransAlta	0	2	6	1	2.89
Northland Power	0	3	4	0	2.57

TransAlta presently has a consensus target price of $24.50, indicating a potential upside of 86.37%. Given TransAlta’s stronger consensus rating and higher possible upside, research analysts plainly believe TransAlta is more favorable than Northland Power.

Risk and Volatility

TransAlta has a beta of 0.75, meaning that its stock price is 25% less volatile than the S&P 500. Comparatively, Northland Power has a beta of 0.06, meaning that its stock price is 94% less volatile than the S&P 500.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
TransAlta	$1.72 billion	2.41	-$98.77 million	($0.18)	-73.03
Northland Power	$1.74 billion	2.35	-$116.84 million	($0.41)	-38.22

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

Summary

TransAlta beats Northland Power on 12 of the 18 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 Northland Power

Northland Power Inc., an independent power producer, develops, builds, owns, and operates clean and green power projects in Canada, Netherlands, Germany, Spain, Colombia, and internationally. The company produces electricity from renewable resources, such as wind and solar, as well as natural gas for sale under power purchase agreements and other revenue arrangements. It owned or had an economic interest 3.4 gigawatts of operating generating capacity. The company was founded in 1987 and is headquartered in Toronto, Canada.