Vistra Corp. VST is currently trading at a premium valuation compared to its Zacks Utility Electric Power industry, with its forward 12-month price-to-earnings (P/E) ratio at 18.63X. The industry is currently trading at 14.27X and the broader Zacks Utilities Sector’s 15.23X.

Vistra's objective is to expand business through prudent investments in attractive retail, renewable, and energy storage assets while reducing its carbon footprint and creating a more sustainable company with enduring long-term value for its stakeholders.

Vistra is currently trading at a premium compared with another operator in the industry, Duke Energy Corporation DUK, which has a strong nuclear fleet. The current P/E- F12M ratio of Duke Energy is 18.25X.

VST Stock Trading at a Premium

Image Source: Zacks Investment Research

Is Vistra’s premium valuation justified at this present moment? Let’s have a look at its earnings estimates movement, earnings surprise history, and fundamental factors that can impact its valuation.

Factors Acting as Tailwind for VST Stock

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

Demand for clean electricity is rising from the Artificial Intelligence powered data centers in the United States. Vistra, with its clean power generation capacity of nearly 6,400 megawatts (MW from its nuclear fleet, is poised to benefit from the rising demand from data centers. Duke Energy, another company operating in the same space, has 10,700 MW of generating capacity from its nuclear fleet.

As of Feb. 24, 2025, Vistra has hedged 100% of its expected generation volumes for 2025 and around 80% for 2026. The company's comprehensive hedging program and recent forward price curves support its 2025 guidance range.

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.

Vistra's Price Performance

Shares of Vistra have rallied 71.3% in the past 12 months compared with the industry’s growth of 15.7%, courtesy of its strong retail and commercial operations.

Image Source: Zacks Investment Research

VST Stock’s ROE Higher Than its Industry

VST’s trailing 12-month return on equity (ROE) is 71.84%, way ahead of its industry average of 9.77%. ROE, a profitability measure, reflects how effectively a company is utilizing its shareholders’ funds in its operations to generate income.

Image Source: Zacks Investment Research

Another company, Constellation Energy CEG, which has a large nuclear fleet, has a ROE of 21.96X, which is better than the industry average. Out of Constellation Energy’s total production volume of 32,400 MW, nearly 60% of production comes from nuclear energy.

VST Stock’s Earnings Estimates Are Going Down

The Zacks Consensus Estimate for 2025 and 2026 has moved 2.4% and 11.7% south, respectively, in the past 60 days. Vistra, over the last four quarters, surpassed EPS estimates just once, which is likely to have resulted in a conservative approach of the analyst covering this stock.

Image Source: Zacks Investment Research

Like Vistra, Constellation Energy also produces a large volume of clean energy. The Zacks Consensus Estimate for Constellation Energy’s 2025 and 2026 earnings per share has moved up 0.8% and 2.5%, respectively, in the past 60 days.

Vistra’s Capital Return Program

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

As of Feb. 24, 2025, Vistra has executed $4.9 billion in share repurchases since November 2021. Vistra had 338.9 million shares outstanding, representing a 30% reduction of the amount of the shares outstanding on Nov. 2, 2021, and $1.9 billion of the share repurchase authorization remains available, which it expects to complete by year-end 2026.

VST’s board of directors has also approved a quarterly dividend of 22.35 cents for the first quarter of 2025, reflecting a sequential increase of 0.9%. VST’s management is targeting a dividend payment of $300 million annually. Check VST’s dividend history here.

Summing Up

Vistra's comprehensive hedging program, which has more than 70 sites with land and interconnects for the future development of clean energy projects, will allow it to move toward more clean electricity generation. The company enjoys the benefit of rising demand for clean electricity in its service territory.

However, Vistra’s earnings per share estimates have decreased over the last 60-day period, and the company lagged estimates in the last reported quarter. The stock is also trading at a premium, which makes us cautious.

Vistra currently carries a Zacks Rank #3 (Hold), and investors can stay invested in this stock and enjoy the benefits of dividends, while new investors should wait a little longer and look for a better entry point later.

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

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Constellation Energy Corporation (CEG) : Free Stock Analysis Report

Duke Energy Corporation (DUK) : Free Stock Analysis Report

Vistra Corp. (VST) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research