When a Canadian stock drops more than 30%, most investors run. But the smarter move, especially in the case of a fundamentally sound Canadian stock, might be to walk in the other direction. TransAlta (TSX:TA) is one of those stories. It’s down 34% from its recent highs, but this could be a golden opportunity to buy and hold a magnificent Canadian stock that has long-term value written all over it.
About TransAlta
TransAlta isn’t new to the energy game. It’s been around for more than 100 years and remains one of Canada’s most important power producers. Today, it generates electricity from a mix of renewables as well as natural gas. The Canadian stock has been aggressively transitioning to clean energy while still maintaining reliable baseload power. That balance is what gives it staying power, even in uncertain markets.
But let’s get into why the Canadian stock has fallen so far. Over the past year, TransAlta has faced pressure from lower power prices and higher financing costs. Those are tough headwinds for any utility. In its most recent earnings report for the first quarter (Q1) of 2025, TransAlta reported revenue of $625 million, compared to $735 million in Q1 2024. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) dropped to $270 million from $342 million a year earlier. Net earnings attributable to common shareholders were $46 million, or $0.15 per share, down sharply from $222 million, or $0.72 per share, in Q1 2024.
That decline spooked investors. But the results weren’t entirely negative. In fact, operational performance was solid. Plant availability came in at 94.9%, up from 92.3% the year before. That means TransAlta’s assets are running well and delivering consistent energy output. The problem wasn’t operations; it was market conditions.
Digging deeper
Here’s where things get interesting. Even though profits were lower, TransAlta reaffirmed its full-year 2025 guidance, targeting adjusted EBITDA between $1.2 billion and $1.3 billion and free cash flow between $575 million and $675 million. That kind of stability is key for long-term investors. Management clearly believes the worst is behind it, and the business is still expected to generate significant cash in the quarters ahead.
Another reason to like TransAlta? It’s making smart moves to strengthen its future. The Canadian stock recently closed a deal with U.S.-based Nova Clean Energy, providing a US$75 million term loan and a US$100 million revolving facility. That investment gives TransAlta access to a pipeline of renewable development projects in the U.S.
At the same time, TransAlta raised $450 million in medium-term notes and used that money to repay a $400 million term loan that was coming due in 2025. That refinancing move helps reduce near-term risk and improves financial flexibility. It’s the kind of behind-the-scenes financial management that doesn’t grab headlines but makes a real difference to a company’s long-term health.
Growth and income
So, what about the dividend? TransAlta currently pays $0.065 per share quarterly, or $0.26 annually. That gives the stock a yield of about 1.9% based on its recent share price of $13.41. For a Canadian stock that’s focused on growth and transitioning its fleet to renewables, the modest yield makes sense. The real value here may be in long-term appreciation rather than big upfront payouts.
Speaking of that share price, this is where things get compelling. The Canadian stock has fallen sharply, but analysts still see upside. The average price target among analysts sits at $16.64, with some expecting it could return to $20 in the next 12 months. If the company hits its 2025 targets, those estimates aren’t far-fetched. And that means investors buying today could see not just a recovery but a solid return.
Bottom line
For long-term investors looking to buy and hold, TransAlta offers a compelling combination: a reliable operating history, a shift toward renewables, a massive development pipeline, and solid cash flow. Yes, there are risks. Power prices can be volatile, and interest rates are still high. But the Canadian stock has proven time and again that it can adapt.
So, if you’re looking for a magnificent Canadian stock that’s down 34% and ready to rebound, this might be the time to give TransAlta a second look. Not every dip is a disaster. Sometimes, it’s the start of something great.
