Stock Analysis

Vistra Corp. (NYSE:VST) Looks Just Right With A 45% Price Jump

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Vistra Corp. (NYSE:VST) shares have continued their recent momentum with a 45% gain in the last month alone. This latest share price bounce rounds out a remarkable 318% gain over the last twelve months.

In spite of the firm bounce in price, it's still not a stretch to say that Vistra's price-to-sales (or "P/S") ratio of 2.6x right now seems quite "middle-of-the-road" compared to the Renewable Energy industry in the United States, where the median P/S ratio is around 2.5x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Vistra

NYSE:VST Price to Sales Ratio vs Industry May 25th 2024

What Does Vistra's P/S Mean For Shareholders?

With revenue that's retreating more than the industry's average of late, Vistra has been very sluggish. One possibility is that the P/S is moderate because investors think the company's revenue trend will eventually fall in line with most others in the industry. You'd much rather the company improve its revenue if you still believe in the business. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think Vistra's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Vistra?

The only time you'd be comfortable seeing a P/S like Vistra's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 11%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 14% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 8.5% per annum over the next three years. That's shaping up to be similar to the 7.9% per annum growth forecast for the broader industry.

With this information, we can see why Vistra is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Key Takeaway

Its shares have lifted substantially and now Vistra's P/S is back within range of the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've seen that Vistra maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Before you settle on your opinion, we've discovered 1 warning sign for Vistra that you should be aware of.

If these risks are making you reconsider your opinion on Vistra, explore our interactive list of high quality stocks to get an idea of what else is out there.

Valuation is complex, but we're helping make it simple.

Find out whether Vistra is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.