The news was mixed on TransCanada Corporation's (NYSE:TRP) big expansion projects in 2017. But even though the midstream oil and natural gas company didn't get everything it wanted last year, there was enough good news to keep growth headed higher. Given expectations for solid results in 2018 and beyond, the recent sell-off appears to be a potential buying opportunity. Here's what you need to know.

A notable price drop

TransCanada's shares are around 12% below their late 2017 highs and 20% off of their all-time peak in 2014. That's pushed the dividend yield up to around 5%, toward the high end of the company's historical range. TransCanada's enterprise value to EBITDA ratio, meanwhile, is around 13.5, notably below the 15.5 or so that giant peers Enterprise Products Partners L.P. (NYSE:EPD) and Enbridge Inc. (NYSE:ENB) are fetching today. I wouldn't call this a screaming buying opportunity, but the company looks cheaper today than it did just a short while ago. It's at least a fair entry point.

A man welding a pipeline

Image source: Getty Images

The relative discount is attractive given that 95% of the company's EBITDA is tied to long-term contracts or regulated assets. Its core business is very stable. That stability is further highlighted by the stock's beta of 0.6, suggesting it is about 40% less volatile than the broader market. That core business consistency is also part of the reason why TransCanada has been able to increase its dividend every year for 18 consecutive years. The other piece of that puzzle here, however, is a long-term focus on growth.

For example, since the turn of the century, TransCanada has invested roughly CA$75 billion in its core business. The $40 billion market cap company's assets now span from Canada to Mexico. But all of that's the past -- what about the future? 

A tough 2017, but a bright future

The bad news in 2017 was TransCanada's decision to cancel the Energy East project. This was a major pipeline that would have carried Canadian oil sands oil across Canada to refineries where it could be processed, and pulling it out of the backlog is a notable issue. However, the company's Keystone XL project is finally moving forward again and its 2016 Columbia Pipeline acquisition has started to bear fruit. All in, 2017 was a good year for TransCanada, despite the headwinds from asset sales in the power generation space and an equity issuance to help fund the company's growth plans. The board was confident enough about the future to increase the dividend by roughly 10% when the company announced fourth-quarter earnings.   

A bar chart showing TransCanada's plan for 10% annual dividend growth

TransCanada has big dividend growth plans. Image source: TransCanada Corporation. 

However, it's TransCanada's growth plans that are most interesting here. Right now the pipeline company has roughly 24 billion Canadian dollars in near-term growth projects on the books. And it has another CA$20 billion in mid- to long-term projects that it's considering. (Note that these numbers are after pulling out the Energy East project.) As all of those projects get built and come on line, the cash they generate is expected to push annual EBITDA growth to as much as 10% a year through 2021, with the dividend growing at a roughly similar rate.   

A fair entry point

The recent price pullback coupled with TransCanada's project backlog suggest that investors looking at the stock can get a compelling mix of value and growth. It's not an incredible deal, but you shouldn't expect a company that's projecting EBITDA and dividend growth of roughly 10% annually over the next few years to trade on the cheap. If you are looking for a decent entry point into a large, geographically diversified midstream company with a strong operating history and solid business outlook, then you should do a deep dive on TransCanada today. This opportunity may not last long.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.