Long-established in the Utilities - Independent Power Producers industry, Vistra Corp (VST, Financial) has built a commendable reputation over the years. Recently, the company experienced a notable daily gain of 4.58%, alongside a three-month change of 24.67%. Despite these gains, the latest insights from the GF Score suggest potential challenges ahead. With lower rankings in critical areas such as financial strength, growth, and valuation, Vistra Corp may struggle to maintain its historical performance levels. This article delves into these key metrics to uncover the evolving challenges facing Vistra Corp.
What Is the GF Score?
The GF Score is a proprietary ranking system developed by GuruFocus, assessing stocks across five key aspects of valuation. This system has proven effective in correlating with long-term stock performances from 2006 to 2021. Stocks with higher GF Scores typically yield better returns. Thus, investors are advised to focus on companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 representing the highest potential for return.
- Financial strength rank: 4/10
- Profitability rank: 5/10
- Growth rank: 9/10
- GF Value rank: 1/10
- Momentum rank: 3/10
Based on these metrics, GuruFocus assigned Vistra Corp a GF Score of 67 out of 100, indicating a challenging outlook for future performance.
Understanding Vistra Corp's Business
Vistra Corp, with a market cap of $31.87 billion and annual sales of $13.41 billion, operates at a 12.03% operating margin. As one of the largest power producers and retail energy providers in the U.S., Vistra Corp has significantly expanded its operations. Following the acquisition of Energy Harbor in 2024, the company now controls 41 gigawatts of diverse power generation assets and one of the world's largest utility-scale battery projects. Its retail electricity business serves 5 million customers across 20 states, including nearly a third of all Texas electricity consumers. Since emerging from the Energy Future Holdings bankruptcy in 2016 and acquiring Dynegy in 2018, Vistra Corp has continued to evolve and expand its market presence.
Financial Strength Breakdown
Vistra Corp's financial metrics reveal some concerns regarding its balance sheet health. The company's interest coverage ratio of 2.42 is lower than 57.49% of its industry peers, suggesting potential difficulties in managing interest expenses. Furthermore, its Altman Z-Score of 1.02 falls below the distress threshold, indicating possible financial distress in the near future. The low cash-to-debt ratio of 0.07 and a high debt-to-equity ratio of 2.9 further underscore its heavy reliance on borrowing, which could be precarious in volatile markets. Additionally, a debt-to-Ebitda ratio of 4.3 exceeds the cautionary benchmark set by investment experts, highlighting risks associated with its debt levels.
Profitability Concerns
The declining Gross Margin over the past five years presents another red flag for Vistra Corp. The margins have fluctuated significantly, dropping to as low as 11.17% in 2021 before recovering to 37.35% in 2023. This volatility in profitability, coupled with the company's financial leverage, could impact its ability to sustain earnings growth over the long term.
Conclusion
Considering Vistra Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's challenging position for potential underperformance. Investors should weigh these factors carefully when assessing the company's future prospects. For those seeking more robust investment opportunities, explore additional companies with strong GF Scores using the 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.
