Critical Comparison: TransAlta (NYSE:TAC) & Unitil (NYSE:UTL)

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

Valuation and Earnings

This table compares Unitil and TransAlta”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Unitil	$494.80 million	1.80	$47.10 million	$2.89	17.21
TransAlta	$2.08 billion	1.94	$167.12 million	($0.48)	-28.28

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

Risk & Volatility

Unitil has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500. Comparatively, TransAlta has a beta of 0.75, meaning that its share price is 25% less volatile than the S&P 500.

Insider and Institutional Ownership

76.8% of Unitil shares are owned by institutional investors. Comparatively, 59.0% of TransAlta shares are owned by institutional investors. 2.0% of Unitil shares are owned by company insiders. Comparatively, 13.1% of TransAlta shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Unitil	9.32%	9.04%	2.62%
TransAlta	-7.39%	3.00%	0.26%

Analyst Ratings

This is a summary of recent ratings and recommmendations for Unitil and TransAlta, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Unitil	0	2	0	0	2.00
TransAlta	1	2	6	1	2.70

Unitil currently has a consensus price target of $55.00, indicating a potential upside of 10.57%. TransAlta has a consensus price target of $19.88, indicating a potential upside of 46.41%. Given TransAlta’s stronger consensus rating and higher probable upside, analysts clearly believe TransAlta is more favorable than Unitil.

Dividends

Unitil pays an annual dividend of $1.80 per share and has a dividend yield of 3.6%. TransAlta pays an annual dividend of $0.19 per share and has a dividend yield of 1.4%. Unitil pays out 62.3% of its earnings in the form of a dividend. TransAlta pays out -39.6% 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. Unitil has increased its dividend for 12 consecutive years and TransAlta has increased its dividend for 2 consecutive years. Unitil is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

TransAlta beats Unitil on 10 of the 18 factors compared between the two stocks.

About Unitil

Unitil Corporation, a public utility holding company, engages in the distribution of electricity and natural gas. It operates through two segments, Utility Electric Operations, Utility Gas Operations. The company distributes electricity in the southeastern seacoast and state capital regions of New Hampshire, and the greater Fitchburg area of north central Massachusetts; and distributes natural gas in southeastern New Hampshire and portions of southern and central Maine, including the city of Portland and the Lewiston-Auburn area, as well as electricity and natural gas in the greater Fitchburg area of north central Massachusetts. It also operates 86 miles of interstate underground natural gas transmission pipeline that provides interstate natural gas pipeline access and transportation services primarily in Maine and New Hampshire. In addition, the company provides real estate management services. It serves approximately 108,100 electric customers and 87,500 natural gas customers. Unitil Corporation was incorporated in 1984 and is headquartered in Hampton, New Hampshire.

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.