Long-established in the Utilities - Independent Power Producers industry, Vistra Corp (VST, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.84%, juxtaposed with a three-month change of 22.84%. 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 capitalization of $54.77 billion and sales amounting to $16.27 billion, operates as one of the largest power producers and retail energy providers in the U.S. 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 and acquired Dynegy in 2018.
Financial Strength Breakdown
Vistra Corp's financial strength indicators present some concerning insights about the company's balance sheet health. Vistra Corp has an interest coverage ratio of 4.51, which positions it better than 64.89% of 319 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. It's worth noting that 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 1.88, which is below the safe threshold of 2.99. Although this does not imply immediate danger of financial distress, the stock may face some financial struggles if the Altman Z-score drops below 1.81.
Additionally, the company's low cash-to-debt ratio at 0.06 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 2.91, which is worse than 87.72% of 391 companies in the Utilities - Independent Power Producers industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations.
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: 2020: 40.61; 2021: 11.17; 2022: 12.25; 2023: 37.35; 2024: 34.32. This trend underscores the company's struggles to convert its revenue into profits.
Next Steps
In conclusion, Vistra Corp's financial strength, profitability, and growth metrics, as highlighted by the GF Score, indicate potential underperformance. The company's high debt levels, declining profitability, and low financial strength rank suggest that it may face challenges in maintaining its historical performance. Investors should carefully consider these factors when evaluating Vistra Corp's future prospects. For those interested in exploring companies with strong GF Scores, GuruFocus Premium members can use 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.
