Vistra or Southern Company: Which Utility Stock Offers Better Upside?
The companies operating in the Zacks Utility -Electric Power industry offer a compelling opportunity due to their stable cash flows and regulated business models. Domestic-focused utilities typically operate under long-term power purchase agreements, which safeguard against economic cycles. The rising demand for electricity and systematic capital investment is increasing the efficiency of operations, which enables utilities to maintain stable earnings and are well-positioned to distribute regular dividends to shareholders.
Utility power companies are currently going through an energy transition. Many are actively investing in clean energy infrastructure, including solar, wind, battery storage and grid modernization. As the world moves toward decarbonization, utilities that are early adopters of renewables and low-carbon technologies stand to benefit from an expanded market and reduced fuel cost volatility, enhancing their appeal to institutional and retail investors alike. Amid such a backdrop, let's compare Vistra Corp. VST and T he Southern Company SO. These prominent U.S. electric utilities are actively investing in renewable energy, making them pivotal players in the shift toward cleaner power generation.
The Southern Company offers stable, long-term value through its regulated utility operations and strategic investments in clean energy. With a diversified generation mix, strong customer base, and constructive regulatory environment, it delivers reliable earnings and dividend growth. Its commitment to decarbonization, including nuclear expansion and renewable integration, positions it well for the evolving energy transition.
Vistra Energy is emerging as a major player in the nuclear energy sector. Its 2023 acquisition of Energy Harbor significantly bolstered its nuclear asset base and led to the creation of Vistra Vision, a dedicated subsidiary focused on zero-carbon power generation. Additionally, the company is advancing clean hydrogen projects linked to its nuclear fleet, leveraging federal tax incentives provided under the Inflation Reduction Act.
Given that both companies are prominent players in the utility industry, it's worthwhile to take a closer look at their fundamentals. A detailed comparison will help determine which stock offers a more attractive investment opportunity for investors.
VST & SO's Earnings Growth Projections
The Zacks Consensus Estimate for Vistra's earnings per share in 2025 and 2026 has increased by 3.7% and 2.84%, respectively, in the past 60 days. Long-term (three to five years) earnings growth per share is pegged at 13.18%.
The Zacks Consensus Estimate for The Southern Company's earnings per share in 2025 has gone down by 0.23% in the past 60 days, and 2026 earnings per share has moved up by 0.22% in the same time period. Long-term (three to five years) earnings growth per share is pegged at 6.55%.
Return on Equity (ROE)
ROE is an essential financial indicator that evaluates a company's efficiency in generating profits from the equity invested by its shareholders. It demonstrates how well management is utilizing the capital provided to increase earnings and deliver value. VST's current ROE is 87.03% compared with SO's ROE of 12.7%. NEE outperforms the industry's ROE of 10.09%.
VST & SO's Dividend Yield
Dividends are regular payments made by a company to its shareholders and represent a direct way for investors to earn a return on their investment. They are an important indicator of a company's financial health and stability, often signaling strong cash flow and consistent earnings. Utilities are known for regular dividend payments to their shareholders.
Currently, the dividend yield for Vistra is 0.48%, while the same for The Southern Company is 3.26%. The dividend yields of both companies are lower than their industry's yield of 3.27%.
VST & SO's Sales Estimates
The Zacks Consensus Estimate for Vistra's sales estimates in 2025 and 2026 reflects year-over-year growth of 28.91% and 4.53%, respectively.
The Zacks Consensus Estimate for Southern Company's sales estimates in 2025 and 2026 reflects year-over-year growth of 5.84% and 3.7%, respectively.
Debt to Capital
The Zacks Utilities sector is a capital-intensive one, and huge investments are required at regular intervals to upgrade, maintain and expand operations. The usage of new evolving technology also requires investments. Therefore, utilities borrow from the market and add it to their internal cash generation to fund their long-term investments.
Vistra's debt-to-capital currently stands at 77.12% compared with Duke Southern Company's debt-to-capital of 64.83%. Both companies are using higher debt to fund their business, as the industry's debt-to-capital stands at 60.81%.
Valuation
Vistra currently appears to be trading at a premium compared with The Southern Company on a Price/Earnings Forward 12-month basis. (P/E- F12M).
VST is currently trading at 26.29X, while SO is trading at 20.44X compared with the industry's 15.29X.
Conclusion
Vistra and The Southern Company are strategically investing in their infrastructure to serve customers more efficiently and reliably.
Based on the above discussion, The Southern Company currently has a marginal edge over Vistra, despite the stocks carrying a Zacks Rank #3 (Hold) each. SO's relatively lower debt usage to run operations, cheaper valuation, and higher dividend yield make it a better choice in the utility space.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners Up
Southern Company (The) (SO): Free Stock Analysis Report
Vistra Corp. (VST): Free Stock Analysis Report
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
National Post
28 minutes ago
- National Post
NHL, NHLPA close to agreeing on a new collective bargaining agreement: Sources
The NHL and NHL Players' Association are on the verge of extending the collective bargaining agreement more than a year before it expires and expanding the regular season to 84 games. Article content The league and union have been in talks since April and are closing in on a memorandum of understanding addressing a number of high-profile topics long before the current agreement runs out in September 2026. The extension that could be announced as soon as Friday at the draft in Los Angeles would provide extended labor peace in a sport that has had multiple work stoppages, including the 2004-05 lockout that wiped out an entire season. Article content Article content Article content The league and union closing in on a deal was confirmed Thursday by three people familiar with the negotiations who spoke with The Associated Press on condition on anonymity because the deal had not yet been finalized. It was first reported by Daily Faceoff. Article content Two of the people said the new CBA will increase the regular season to 84 games from 82, shorten the maximum length of contracts and add a playoff salary cap for the first time. Extending the regular season from a total of 1,312 games to 1,344 would also come with curtailing exhibition play. Article content Since 2013, players have been able to re-sign with their own team for up to eight years and sign with another for up to seven years. Under the new CBA terms, each would be reduced by a year, to seven for re-signing and six for changing teams. Article content A salary cap in the postseason would prevent teams from using long-term injured reserve rules to load up their rosters. Currently, teams with players on LTIR can exceed the cap by roughly the amount of the players' salaries until the playoffs begin. The option has been used, for example, by Chicago (Patrick Kane in 2015), Tampa Bay (Nikita Kucherov in 2021) and the Vegas Golden Knights (Mark Stone in multiple seasons) during their playoff runs. Article content NHL Commissioner Gary Bettman and NHLPA executive director Marty Walsh foreshadowed a quick conclusion to labor talks speaking at the Stanley Cup Final earlier in June. Bettman said the sides were 'in really good shape, having really good discussions,' and Walsh added that talks were 'moving forward, and I feel good with where we are.' Article content A full, new CBA would be the first since 2013. The league and the union have been working on the memorandum negotiated in 2020 to finish that season during the pandemic and would meld that agreement with the framework from 12 years ago. Article content
Globe and Mail
42 minutes ago
- Globe and Mail
Why One Top Analyst Is Bullish on Amazon Stock (AMZN) Despite AWS Cost Pressures
Amazon (AMZN) rose 2% on Tuesday to close at $212.77, and one top Wall Street analyst sees more upside ahead. In a new update, analyst Michael Morton at MoffettNathanson raised his price target on the stock from $250 to $253 while keeping a Buy rating, suggesting about 19% potential upside from current levels. Morton believes Amazon is well-positioned to beat profit estimates in 2025 and 2026, even as cost pressures rise in its cloud unit, Amazon Web Services (AWS). Confident Investing Starts Here: It is worth noting that Morton has a success rate of 70%, with an average return per rating of 22.5% over a one-year timeframe. Top Analyst's Take on Amazon The analyst said that while Amazon is known for its shopping business, its real profits come from AWS and advertising. Following Amazon's latest quarterly breakdown on segment-level depreciation, Morton updated his AWS forecast and believes that most analysts may be underestimating the rising costs from Amazon's large cloud investments. He expects Amazon to spend about '$200 billion from FY24 to FY26 ' to expand AWS, mostly on servers and network equipment, which lose value quickly over time. As a result, depreciation costs at AWS are set to rise from '13% in Q424 to 23% in Q426.' This could lower AWS profit margins by about 10 percentage points. Even with some margin pressure ahead, Morton remains upbeat about Amazon's outlook. He sees the next 18 months as strong, particularly for AWS margins in 2025. He expects Amazon to beat profit estimates in both 2025 and 2026, supported by strong demand, better cost efficiency, and steady growth in its high-margin advertising business. His updated price target of $253 reflects the view that Amazon's strong earnings performance in the near term is not yet fully priced in by the market. What Is the Price Target for Amazon Stock? Overall, Wall Street is bullish on Amazon stock, with a Strong Buy consensus rating based on 47 Buys and one Hold recommendation. The average AMZN stock price forecast of $243 indicates 14.21% upside potential. See more AMZN analyst ratings
Globe and Mail
42 minutes ago
- Globe and Mail
Why Duolingo Stock Plummeted This Week
Shares of the world's largest education app, Duolingo (NASDAQ: DUOL), were down 14% this week as of 2:30 p.m. ET Thursday, according to data provided by S&P Global Market Intelligence. The main reason for this decline came from a Jefferies analyst highlighting that Duolingo's daily active user (DAU) growth slowed to 37% in June. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » Analysts expected 44% growth in DAUs for the company's second quarter, but the data shows it'll be closer to 39%, prompting the adverse reaction from the market. Duolingo learns about decelerating DAU growth While 30 days' worth of disappointing DAU data isn't bad in and of itself, it extends a worrying trend. Over the last five months, the company's DAU growth declined from 56% in February to 53% in March, 41% in April, 40% in May, and finally 37% in June. This deceleration is far from a death knell for Duolingo's stock. But the market may be justified in lowering the company's valuation until it sees improving data. Even after this drop, the company trades at 106 times free cash flow, including stock-based compensation. However, following this decline, I may find myself buying more Duolingo shares soon, thanks to its promising growth optionality. Far from just a language learning app, Duolingo has multiple potential growth outlets, like: Adding to its courses, as it has already done with ABCs for children, math, music, and now chess. Building upon its standardized test offerings, such as its Duolingo English Test (roughly 10% of sales). Growing the advertising revenue from its non-subscriber tier (around 6% of sales). Incorporating artificial intelligence (AI) into its offerings, such as its video chat with Lily. Though its days of 50% hypergrowth may be in the past, Duolingo's longer-term growth story is still in its early chapters. Should you invest $1,000 in Duolingo right now? Before you buy stock in Duolingo, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Duolingo wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $687,731!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $945,846!* Now, it's worth noting Stock Advisor 's total average return is818% — a market-crushing outperformance compared to175%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 23, 2025
