With a daily gain of 3.08%, a three-month gain of 30.32%, and Earnings Per Share (EPS) of 3.66, Vistra Corp (VST, Financial) continues to be a noteworthy player in the stock market. However, the question remains: is the stock fairly valued? This article aims to explore this question by delving into Vistra's financials, performance, and intrinsic value. We encourage readers to follow this comprehensive analysis to gain a better understanding of Vistra's valuation.
Company Introduction
Vistra Energy is one of the largest power producers and retail energy providers in the U.S., owning and operating 38 gigawatts of nuclear, coal, natural gas, and solar power generation. Serving 4.3 million customers in 20 states, Vistra's retail business serves almost one third of all Texas electricity consumers. The company emerged from the Energy Future Holdings bankruptcy as a standalone entity in 2016, acquired Dynegy in 2018, and plans to close the Energy Harbor acquisition in 2023. With a stock price of $33.34 and a GF Value of $33.42, Vistra (VST, Financial) appears to be fairly valued.
Understanding the GF Value
The GF Value is a proprietary measure that estimates a stock's current intrinsic value. It is based on historical multiples, an adjustment factor from GuruFocus based on the company's past returns and growth, and future estimates of the business performance. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to our valuation method, Vistra (VST, Financial) is fairly valued with a market cap of $12.30 billion. Since it is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Analyzing Vistra's Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it is crucial to review a company's financial strength before deciding to buy its stock. Vistra's cash-to-debt ratio of 0.05 is worse than 84.82% of 415 companies in the Utilities - Independent Power Producers industry. GuruFocus ranks Vistra's overall financial strength at 4 out of 10, indicating that its financial strength is poor.
Assessing Vistra's Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk to investors. Vistra has been profitable 2 times over the past 10 years. Over the past twelve months, the company had a revenue of $16.60 billion and Earnings Per Share (EPS) of $3.66. Its operating margin of 15.88% ranks better than 54.28% of 409 companies in the Utilities - Independent Power Producers industry. Overall, the profitability of Vistra is ranked 5 out of 10, indicating fair profitability.
Growth is probably the most crucial factor in a company's valuation. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Vistra is 11.2%, which ranks better than 50.28% of 362 companies in the Utilities - Independent Power Producers industry. However, the 3-year average EBITDA growth rate is -30.2%, ranking worse than 92.06% of 340 companies in the same industry.
Comparing Vistra's ROIC and WACC
Another profitability indicator is the comparison between a company's return on invested capital (ROIC) and the weighted cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, ROIC should be higher than WACC. For the past 12 months, Vistra's ROIC is 6.6, and its WACC is 6.66.
Conclusion
In summary, Vistra Corp (VST, Financial) is believed to be fairly valued. The company's financial condition is poor, but its profitability is fair. Its growth ranks worse than 92.06% of 340 companies in the Utilities - Independent Power Producers industry. For more information about Vistra stock, check out its 30-Year Financials here.
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