Vistra Corp: Premium Valuation Analysis amid Strategic Growth Plans
Vistra Corp (VST) is currently trading at a premium valuation compared to its Zacks Utility Electric Power industry, with its forward 12-month price-to-earnings (P/E) ratio at 18.63X. In contrast, the industry averages a 14.27X P/E ratio, while the broader Zacks Utilities Sector sits at 15.23X.
Vistra aims to enhance its business by investing strategically in appealing retail, renewable, and energy storage assets. This strategy also focuses on reducing its carbon footprint, fostering sustainability, and creating enduring value for its stakeholders.
Compared to another operator in the industry, Duke Energy Corporation (DUK), Vistra is trading at a premium. Duke Energy, known for its robust nuclear fleet, has a current P/E- F12M ratio of 18.25X.
Vistra Corp’s Premium Valuation
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Is Vistra’s premium valuation justified at this time? To answer this question, we will explore its earnings estimates, earnings surprise history, and various fundamental factors that could influence its valuation.
Positive Factors Driving VST Stock
The growth of large load data centers and the electrification of oil field operations, particularly in the Permian Basin, significantly boost demand for Vistra’s services. Moreover, the company has seen an increase in residential customers within its service area.
Demand for clean electricity is soaring, especially from Artificial Intelligence-powered data centers in the United States. With nearly 6,400 megawatts (MW) of clean power generation capacity from its nuclear fleet, Vistra is well-positioned to benefit from this demand. In comparison, Duke Energy draws on a larger capacity of 10,700 MW from its nuclear sources.
As of February 24, 2025, Vistra has hedged 100% of its anticipated generation volumes for 2025 and approximately 80% for 2026. The company’s comprehensive hedging strategy and optimistic forward price projections align with its 2025 guidance range.
Vistra holds over 70 sites with land and interconnections for future clean energy projects. Additionally, the company received regulatory approval from the Nuclear Regulatory Commission to extend operations at its Comanche Peak nuclear plant by another 20 years.
Vistra’s Stock Performance
Over the past 12 months, Vistra shares have surged 71.3%, outpacing the industry’s growth of 15.7%. This remarkable performance stems from the company’s strong retail and commercial operations.
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VST Stock Demonstrates Strong Return on Equity
Vistra boasts a trailing 12-month return on equity (ROE) of 71.84%, significantly surpassing the industry average of 9.77%. ROE serves as a key measure of profitability, indicating how efficiently a company is using shareholder equity to generate profits.
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In comparison, Constellation Energy (CEG), which operates a substantial nuclear fleet, has a ROE of 21.96%, also exceeding the industry average. Notably, around 60% of Constellation’s total production volume of 32,400 MW derives from nuclear energy.
Downward Trend in VST Stock’s Earnings Estimates
Recently, the Zacks Consensus Estimate for Vistra’s earnings in 2025 and 2026 has decreased by 2.4% and 11.7%, respectively, over the past 60 days. Vistra managed to surpass EPS estimates in only one of the last four quarters, likely leading analysts to adopt a more conservative stance in their projections.
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Similarly, Constellation Energy has also been increasing its clean energy output. Its earnings per share estimates for 2025 and 2026 have risen by 0.8% and 2.5%, respectively, over the same period.
Vistra’s Commitment to Shareholder Returns
Vistra remains dedicated to enhancing shareholder value through its share repurchase program and dividend declarations.
By February 24, 2025, Vistra had executed $4.9 billion in share repurchases since November 2021, reducing its outstanding shares by 30% to approximately 338.9 million. The company still has $1.9 billion available under its share repurchase authorization, which is expected to be utilized by the end of 2026.
The board of directors approved a quarterly dividend of 22.35 cents for the first quarter of 2025, reflecting a slight increase of 0.9%. Management is aiming for an annual dividend payment of $300 million. For more detailed insights, check VST’s dividend history here.
Conclusion
Vistra’s extensive hedging program and its numerous sites dedicated to developing clean energy initiatives position the company to benefit from the growing demand for clean electricity. Nevertheless, the recent drops in earnings per share estimates and subpar performances in the last reported quarter raise caution.
Currently, Vistra holds a Zacks Rank #3 (Hold), suggesting that existing investors may continue to enjoy dividends, while new investors might want to wait for a more opportune time to enter.
You can explore the full list of Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
