What is VST's Intrinsic value?

Vistra Corp (VST) Intrinsic Value Analysis

Executive Summary

As of May 29, 2025, Vistra Corp's estimated intrinsic value ranges from $125.25 to $406.77 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $189.68 +16.8%
Discounted Cash Flow (5Y) $183.50 +13.0%
Dividend Discount Model (Multi-Stage) $125.25 -22.9%
Dividend Discount Model (Stable) $144.58 -11.0%
Earnings Power Value $406.77 +150.5%

Is Vistra Corp (VST) undervalued or overvalued?

With the current market price at $162.36, the stock appears to be moderately undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Vistra Corp's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.43 0.71
Cost of equity 5.8% 8.8%
Cost of debt 4.6% 5.3%
Tax rate 24.2% 25.9%
Debt/Equity ratio 0.35 0.35
After-tax WACC 5.2% 7.6%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 6.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $14,761 (FY12-2024) to $20,219 (FY12-2034)
  • Net profit margin expansion from 19% to 18%
  • Capital expenditures maintained at approximately 17% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $184 $80,817M 81.5%
10-Year Growth $190 $82,921M 65.8%
5-Year EBITDA $136 $64,811M 77.0%
10-Year EBITDA $151 $69,628M 59.3%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 20.8%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.3%
  • Long-term growth rate: 2.0%
  • Fair value: $125.25 (-22.9% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.8% (Low) to 5.8% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $64 to $225
  • Selected fair value: $144.58 (-11.0% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $9,705M
Discount Rate (WACC) 7.6% - 5.2%
Enterprise Value $128,083M - $185,449M
Net Debt $18,398M
Equity Value $109,685M - $167,051M
Outstanding Shares 340M
Fair Value $322 - $491
Selected Fair Value $406.77

Key Financial Metrics

Metric Value
Market Capitalization $55228M
Enterprise Value $73626M
Trailing P/E 22.77
Forward P/E 20.32
Trailing EV/EBITDA 8.50
Current Dividend Yield 93.87%
Dividend Growth Rate (5Y) 15.78%
Debt-to-Equity Ratio 0.35

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $56.90
Discounted Cash Flow (5Y) 25% $45.88
Dividend Discount Model (Multi-Stage) 20% $25.05
Dividend Discount Model (Stable) 15% $21.69
Earnings Power Value 10% $40.68
Weighted Average 100% $190.19

Investment Conclusion

Based on our comprehensive valuation analysis, Vistra Corp's weighted average intrinsic value is $190.19, which is approximately 17.1% above the current market price of $162.36.

Key investment considerations:

  • Strong projected earnings growth (19% to 18% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 15.78%

Given these factors, we believe Vistra Corp is currently moderately undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.