Today, Vistra Corp (VST, Financial) experienced a notable daily gain of 4.45%, with a striking three-month gain of 116.29%. With an Earnings Per Share (EPS) of 1.63, an intriguing question arises: Is Vistra significantly overvalued? This article delves into Vistra's valuation, providing a thorough analysis based on the proprietary GF Value. Read on to understand whether Vistra's current market price justifies its financial and operational standing.
Company Overview
Vistra Energy stands as one of the largest power producers and retail energy providers in the United States. Following the 2024 acquisition of Energy Harbor, Vistra now controls 41 gigawatts of diverse power generation assets including nuclear, coal, natural gas, and solar, alongside one of the world's largest utility-scale battery projects. Serving 5 million customers across 20 states, Vistra has a significant footprint in the Texas electricity market. Since emerging as a standalone entity post-2016 bankruptcy of Energy Future Holdings, and its subsequent acquisition of Dynegy in 2018, Vistra has solidified its market presence. Currently, with a stock price of $93.17 and a market cap of $32.50 billion, a comparison with the GF Value, which stands at $31.86, suggests a significant overvaluation.
Understanding GF Value
The GF Value is a refined measure of a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. For Vistra, the GF Value suggests the stock should ideally trade at $31.86. Currently priced significantly higher at $93.17, the stock is categorized as overvalued, which could imply a lower future return compared to its business growth.
Financial Strength and Stability
Investing in companies with robust financial health reduces the risk of permanent capital loss. Vistra's cash-to-debt ratio of 0.24, although modest, is better than 51.4% of its peers in the Utilities - Independent Power Producers industry. This indicates a fair level of financial strength, with a GuruFocus rating of 5 out of 10.
Profitability and Growth
Profitability is often a telltale sign of a company's operational efficiency and market position. Vistra has maintained profitability over the past decade, with a revenue of $13.40 billion and an operating margin of 12.03% over the past twelve months, ranking it above 56.28% of its industry counterparts. The company's growth metrics are equally impressive, with a 3-year average annual revenue growth rate of 19.1%, positioning it favorably within the industry.
ROIC vs. WACC
Comparing the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) provides insight into value creation. Vistra's ROIC of 3.99% versus a WACC of 9% suggests challenges in generating returns over its capital costs, which could impact long-term shareholder value.
Conclusion
While Vistra (VST, Financial) exhibits strong growth and profitability, its current market valuation significantly exceeds the GF Value, indicating an overvaluation. Investors should consider this alongside the company's financial health and growth prospects before making investment decisions. For a deeper exploration of Vistra's financials, visit Vistra's 30-Year Financials.
To discover high-quality companies that may deliver above-average returns, check out the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
