Long-established in the Utilities - Independent Power Producers industry, Vistra Corp (VST, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 0.67%, juxtaposed with a three-month change of -1.39%. However, fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Vistra Corp.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 4/10
- Profitability rank: 5/10
- Growth rank: 9/10
- GF Value rank: 1/10
- Momentum rank: 3/10
Based on the above method, GuruFocus assigned Vistra Corp the GF Score of 67 out of 100, which signals poor future outperformance potential.
Understanding Vistra Corp Business
Vistra Corp, with a market cap of $29.59 billion and sales of $14.06 billion, operates as one of the largest power producers and retail energy providers in the US. Following the 2024 Energy Harbor acquisition, Vistra owns 41 gigawatts of nuclear, coal, natural gas, and solar power generation along with one of the largest utility-scale battery projects in the world. Its retail electricity business serves 5 million customers in 20 states, including almost a third of all Texas electricity consumers. Vistra emerged from the Energy Future Holdings bankruptcy as a stand-alone entity in 2016. It acquired Dynegy in 2018.
Financial Strength Breakdown
Vistra Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The company has an interest coverage ratio of 2.44, which positions it worse than 58.61% of 331 companies in the Utilities - Independent Power Producers industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 0.98, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.1 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 3.03, which is worse than 89.58% of 403 companies in the Utilities - Independent Power Producers industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations. Additionally, the company's debt-to-Ebitda ratio is 4.34, which is above Joel Tillinghast's warning level of 4 and is worse than 53.13% of 335 companies in the Utilities - Independent Power Producers industry. Tillinghast said in his book “Big Money Think's Small: Biases, Blind Spots, and Smarter Investing” that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Profitability Breakdown
Vistra Corp's low Profitability rank can also raise warning signals. Additionally, Vistra Corp's Gross Margin has also declined over the past five years, as evidenced by the data: 2019: 38.42; 2020: 40.61; 2021: 11.17; 2022: 12.25; 2023: 37.35. This trend underscores the company's struggles to convert its revenue into profits.
Next Steps
Considering Vistra Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
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.
