Shares of Vistra Corp. VST have rallied 65.9% in the past six months compared with its Zacks Utility- Electric Power industry’s growth of 9.3%, courtesy of its strong retail and commercial operations.

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The company benefits from strong residential and business results in both Texas and Midwest and Northeast markets. More than 96% commercial availability of its fossil generation and more than 98% capacity factor of its nuclear fleet in the third quarter allowed the company to gain by catering to the increasing demand in its service territories.

Vistra has outperformed the Zacks Utilities sector and the S&P 500 in the past six months.

Vistra Stock's Price Performance (Six months)

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Vistra shares are trading above the 50-day and 200-day simple moving average, indicating a bullish trend.

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Should you consider adding VST to your portfolio only based on positive price movements? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add VST stock to their portfolio.

Factors Acting as a Tailwind for Vistra Stock

The demand for clean electricity is rising in Vistra’s service area. VST’s ability to produce a high volume of emission-free electricity from its solar, natural gas, nuclear and other alternative energy sources is the primary contributor to its performance.

The development of large load data centers and electrification of oil field operations, primarily in the Permian Basin, continue to boost demand for its services. The company also gained from the addition of new residential customers in its service area.

As of Sept. 30, 2024, Vistra has hedged 100% of its expected generation volumes for the rest of 2024, around 96% for 2025 and about 64% for 2026. The company's comprehensive hedging program and recent forward price curves support its 2024 guidance range.

The generation of clean electricity is an integral part of energy transition, and Vistra has been adding clean sources in its generation sources through organic and inorganic means. Vistra has more than 70 sites with land and interconnects for the future development of clean energy projects. The company also received approval from the Nuclear Regulatory Commission to operate its Comanche Peak nuclear plant for an additional 20 years.

Per a Business Insider report, major tech companies are going to invest nearly $1 trillion in data centers in the next five years. Vistra, with its increasing clean energy volumes, is poised to benefit from the rising demand from data centers. Another utility, Constellation Energy CEG, with its immense nuclear power-driven electricity generation, is also benefiting from data center-driven clean power demand.

VST’s Earnings Estimates Move Up

The Zacks Consensus Estimate for Vistra’s 2024 and 2025 earnings per share has increased 5.53% and 9.42%, respectively, in the last 60 days.

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Vistra’s Capital Return Program

Vistra continues to increase its shareholders' value through its share repurchase program and dividend payments.

The company has bought back shares worth over $4.25 billion from November 2021, resulting in a 29% reduction in outstanding shares from the November 2021 levels. VST’s management expects to continue with the buyback of shares and aims to repurchase at least $3.25 billion worth of outstanding shares between 2024 and 2026.

VST’s board of directors has also approved a quarterly dividend of 22.15 cents for the fourth quarter of 2024, reflecting a sequential increase of 0.9%. Check VST’s dividend history here.

VST Stock’s ROE Higher Than its Industry

VST’s trailing 12-month return on equity (ROE) is 57.63%, way ahead of its industry average of 10.99%. ROE, a profitability measure, reflects how effectively a company is utilizing its shareholders’ funds in its operations to generate income.

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Vistra Stock Trading at a Premium

Vistra is currently trading at a premium valuation compared to its industry, with its forward 12-month price-to-earnings (P/E) ratio at 23.55X. The industry is currently trading at 15.97X.

Vistra is currently trading at a premium compared with another operator in the industry having a strong nuclear fleet, Duke Energy Corporation DUK, which has a strong nuclear fleet. The current P/E- F12M ratio of DUK is 17.24X.

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To Sum Up

Vistra’s earnings per share estimates have increased over the last 60-day period, and the company surpassed estimates in the last reported quarter and is expected to surpass estimates in the fourth quarter.

Vistra operates in a region where electricity demand is rising due to the development of large data centers and electrification in the Permian Basin region. The company is also expanding its clean energy generation portfolio to meet the rising demand.

Due to these positive factors, the stock currently deserves a premium valuation. Vistra’s management continues to increase shareholder value, so it is an appropriate time to add this Zacks Rank #1 (Strong Buy) stock, currently having a VGM Score of B, to your portfolio.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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