Vistra (VST) $137 One of the better utilities with good operating margins and a big focus on clean energy – worth buying on declines.
As data centers hunger for power and nuclear energy gathers steam, Vistra has already benefited from a 200% YTD rise. Its focus on nuclear energy and clean energy partnerships makes it a strong contender, but a short-term correction should make it more attractive.
Vistra’s biggest source of power generation is still hydrocarbons like natural gas, LNG, and coal, accounting for 56% of its total generation as of the first half of 2024 (H1 2024).
However, with the completion of its acquisition of Ohio based nuclear energy utility Energy Harbor in March this year, its focus on nuclear energy in particular and clean energy in general has increased.
As of H1 2024, nuclear energy accounted for 22.9% of its total energy generation, up from 12.3% in H1 2023. The acquisition also made Vistra the second-biggest nuclear energy generator after CEG. Further, with nuclear energy eligible for production tax credits under the US’s Inflation Reduction Act, Vistra’s earnings can be positively impacted with increased focus on nuclear energy.
The stock’s forward EV/EBITDA at 12.38x is also running higher than its five-year average of 7.95x. VST’s forward non-GAAP price-to-earnings (P/E) ratio at 22.84x is similarly higher than the five-year average of 15.17x and as per analysts’ estimates, will remain so next year as well.
As such, a correction would be better for it in the short term, which should give investors a better buying opportunity.
Vistra is not a pure-play nuclear energy company, and that is perhaps to its advantage – it has the cash cow from traditional energy sources to balance out the volatility from nuclear buildout, safety compliance, and regulations.
