Vistra Corp. (NYSE:VST) shares have had a really impressive month, gaining 78% after a shaky period beforehand. This latest share price bounce rounds out a remarkable 312% gain over the last twelve months.

Following the firm bounce in price, you could be forgiven for thinking Vistra is a stock not worth researching with a price-to-sales ratios (or "P/S") of 3.2x, considering almost half the companies in the United States' Renewable Energy industry have P/S ratios below 2.2x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

What Does Vistra's Recent Performance Look Like?

With revenue that's retreating more than the industry's average of late, Vistra has been very sluggish. It might be that many expect the dismal revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

How Is Vistra's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Vistra's is when the company's growth is on track to outshine the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 15%. Regardless, revenue has managed to lift by a handy 19% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Turning to the outlook, the next three years should generate growth of 14% each year as estimated by the ten analysts watching the company. That's shaping up to be materially higher than the 11% each year growth forecast for the broader industry.

In light of this, it's understandable that Vistra's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Vistra's P/S?

Vistra's P/S is on the rise since its shares have risen strongly. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look into Vistra shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You should always think about risks. Case in point, we've spotted 4 warning signs for Vistra you should be aware of, and 1 of them is a bit unpleasant.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.