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Should Value Investors Buy Vistra Energy Corp (VST) Stock?

Zacks Equity Research
·3 min read

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company value investors might notice is Vistra Energy Corp (VST). VST is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 7.66, which compares to its industry's average of 15.37. Over the last 12 months, VST's Forward P/E has been as high as 14.99 and as low as 5.51, with a median of 10.53.

Another notable valuation metric for VST is its P/B ratio of 1.10. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 1.75. Within the past 52 weeks, VST's P/B has been as high as 1.73 and as low as 0.77, with a median of 1.44.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. VST has a P/S ratio of 0.79. This compares to its industry's average P/S of 1.8.

Finally, our model also underscores that VST has a P/CF ratio of 3.20. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 7.58. Over the past year, VST's P/CF has been as high as 5.81 and as low as 2.25, with a median of 4.76.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Vistra Energy Corp is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, VST feels like a great value stock at the moment.


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