Today’s Stock of the Week emerged from bankruptcy recently, but it is a solid company that is paying down debt and not very well followed on Wall Street.

Time to Rebuild

Vistra Energy Corporation (VST) changed its name from TCEH Corporation in November 2016, one month after emerging from bankruptcy. The Texas-based power company generates power from coal, natural gas and nuclear facilities to provide electricity to residential and business customers. It overextended itself by making acquisitions when natural-gas prices were higher and was caught in the big natural-gas price drop—it could not service its debt and had to reorganize. But it is basically a solid company with a strong customer base. The balance sheet is much improved, and the new management is trying to aggressively cut expenses and may add to growth and diversify through acquisitions.

The company will likely have adjusted EBITDA—earnings before interest, taxes, depreciation and amortization—of $1.425 billion this year, with $3 billion in debt. That is a debt-to-EBITDA ratio of 2.1:1—competitors are in the 5:1 range. And Vistra should have free cash flow of $835 million this year, about $1.95/share on a recent share price of $14.99.

Few analysts follow Vistra Energy, so investors who buy now have an opportunity before the firm is better-followed and better-known to have righted itself. Revenue was $5.16 billion last year and should grow to $6.31 billion this year, then grow to $6.97 billion.

Fiscal year: December. Earnings per share: 2018 est./$0.51…2017 est./$0.61…2016/–$0.38.

This Week’s Expert

Scott W. Hood, CFA, is CEO and portfolio manager, First Wilshire Securities Management, Pasadena, California, which manages $351 million.