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 The 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 ProjectionsThe 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%.Image Source: Zacks Investment ResearchThe 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%.Image Source: Zacks Investment ResearchReturn 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 YieldDividends 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 EstimatesThe 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 CapitalThe 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.Image Source: Zacks Investment ResearchVistra’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%.ValuationVistra 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.ConclusionVistra 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 UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Southern Company (The) (SO): Free Stock Analysis Report Vistra Corp. (VST): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks