Shares of electric utility and nuclear power plant operator Vistra (VST -4.50%) stock tumbled 4.1% through 12:55 p.m. ET Tuesday after The Wall Street Journal warned investors that President Trump's plan to kick-start a nuclear power renaissance in America "won't be easy."
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Vistra and the nuclear renaissance
Shares of Vistra have rocketed this past year, up more than 120%, on hopes that artificial intelligence's (AI) insatiable demand for electric power will spur demand for more nuclear power plants to supply that demand -- and on President Trump's promises to support the nuclear sector, including by instructing the Nuclear Regulatory Commission to decide on reactor design applications within 18 months of filing.
That's an aggressive target, and it may not be realistic. Ordinarily, applications take as long as five years to approve. According to the Journal, it's more likely that nuclear power supply will grow -- if it does grow at all -- through "extending the operating licenses of existing reactors or trying to restart a handful of recently closed reactors." In contrast, past efforts to accelerate construction of nuclear plants, historically, "didn't pan out."
Unless this time is different -- as the saying goes -- prospects for Vistra growing dramatically may not pan out either.
Is Vistra stock a sell?
But this doesn't necessarily mean you should sell Vistra stock. Even based on just what we already know, analysts forecast strong earnings growth for Vistra going forward -- better than 20% annually. That's almost fast enough growth to justify the stock's 27.5x earnings valuation, even without a nuclear renaissance. And Vistra stock's about 20% cheaper when valued on free cash flow than when valued on generally accepted accounting principles (GAAP) earnings, too.
At 23x FCF and paying a modest 0.5% dividend yield, Vistra stock looks almost cheap enough to buy.
