Vistra Corp.(VST) is a Fortune 275 integrated retail energy and power generating company headquartered in Irving, Tex., that provides critical resources to customers, businesses, and communities. VST blends a creative, customer-focused retail strategy with safe, dependable, varied, and efficient power generation.
The company's shares have gained 56.2% in price over the past year and 10.8% year-to-date to close yesterday's trading session at $25.23. The company's board of directors announced a quarterly dividend of $0.177 per share of VST's common stock, representing an expected aggregate payment of $75 million this quarter and $150 million cumulatively in 2022. This reflects an 18% increase in the company's quarterly common stock dividend per share over the dividend paid in the second quarter of 2021.
VST had completed approximately $1,195 million in share repurchases as of May 3, 2022, under its $2 billion share repurchase program previously authorized by its board of directors. It has acquired roughly 54 million shares since Nov. 2, 2021, resulting in net shares outstanding of approximately 431.8 million as of May 3, 2022.
Here is what could shape VST's performance in the near term:
Positive Development
Last month, VST announced that its Brightside Solar Facility in Live Oak County, Tex., is now operational. The 50-megawatt solar photovoltaic (PV) project is part of Vistra Zero, the company's increasing portfolio of zero-carbon power-producing assets. Brightside Solar Facility is the first of seven new renewable and energy storage projects that the business plans to bring online across Texas in the coming years. The Texas-sized portfolio of zero-carbon projects, all situated in the ERCOT market, is part of Vistra's almost $1 billion capital commitment, which was initially announced in September 2020.
Improving Financials
During the first quarter, ended March 31, 2022, VST's total revenue came in at $3.13 billion. Its operating loss declined 88.9% year-over-year to $288 million. And the company's net loss narrowed 86.1% from the year-ago value to $285 million. In addition, its net cash from operating activities came in at $591 million.
Impressive Growth Prospects
The Street expects VST's revenues and EPS to rise 33.9% and 174%, respectively, year-over-year to $16.17 billion and $1.99in its fiscal year 2022. In addition, VST's EPS is expected to rise at a 20.3% CAGR over the next five years. Furthermore, the company's EPS and revenue are expected to increase by 10.1% and 2.10%, respectively, next year.
Discounted Valuation
In terms of forward Non-GAAP P/E, the stock is currently trading at 10.99x, which is 45.1% lower than the 20x industry average. Also, its 1.49x forward EV/Sales is 65.9% lower than the 4.38x industry average. Furthermore, VST's 1.82x forward Price/Book is 5.8% lower than the 1.93x industry average.
Consensus Rating and Price Target Indicate Potential Upside
Each of the five Wall Street analysts that rated VST rated it Buy. The 12-month median price target of $30.60 indicates a 21.3% potential upside. The price targets range from a low of $28.00 to a high of $34.00.
POWR Ratings Reflect Solid Prospects
VST has an overall B grade, which equates to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. VST has an A grade for Growth and a B for Value. VST's solid earnings and revenue growth potential is consistent with the Growth grade. In addition, the company's lower-than-industry multiples are in sync with the Value grade.
Among the 64 stocks in the D-rated Utilities – Domestic industry, VST is ranked #3.
Beyond what I stated above, we have graded VST for Sentiment, Quality, Stability, and Momentum. Get all VST ratings here.
Bottom Line
VST's improving financial performance and strong growth estimates position it to witness solid momentum in the coming months. In addition, considering the favorable analysts' price targets and the company's discounted valuation, we think it is an opportune time for investors to scoop up its shares.
How Does Vistra Corp. (VST) Stack Up Against its Peers?
VST has an overall POWR Rating of B, which equates to a Buy rating. This rating is superior to its peers within the same industry, Via Renewables Inc. (VIA), UNITIL Corporation (UTL), and PPL Corporation (PPL), which all are rated C (neutral).
VST shares were unchanged in premarket trading Thursday. Year-to-date, VST has gained 11.65%, versus a -17.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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