A Look At The Fair Value Of NiSource Inc. (NYSE:NI)

Simply Wall St.01:29

Key Insights Using the Dividend Discount Model, NiSource fair value estimate is US$35.22 With US$37.30 share price, NiSource appears to be trading close to its estimated fair value Analyst ...

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(NYSE:NI)","media":"Simply Wall St.","content":"<div>\n<p>Key Insights\n\n Using the Dividend Discount Model, NiSource fair value estimate is US$35.22 \n With US$37.30 share price, NiSource appears to be trading close to its estimated fair value \n  Analyst ...</p>\n\n<a href=\"https://finance.yahoo.com/news/look-fair-value-nisource-inc-172920064.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>A Look At The Fair Value Of NiSource Inc. 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(NYSE:NI)\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-22 01:29 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/look-fair-value-nisource-inc-172920064.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n Using the Dividend Discount Model, NiSource fair value estimate is US$35.22 \n With US$37.30 share price, NiSource appears to be trading close to its estimated fair value \n  Analyst ...</p>\n\n<a href=\"https://finance.yahoo.com/news/look-fair-value-nisource-inc-172920064.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"DCF","symbol_name":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","start_time":0,"source_url":"https://finance.yahoo.com/news/look-fair-value-nisource-inc-172920064.html","article_id":"2485443157","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/nUf2aur04RoQZJcRAQNAzg--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/ab0149814a0278528a8dad56dd33647f"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485443157","pubTimestamp":1732210160,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Using the Dividend Discount Model, NiSource fair value estimate is US$35.22. With US$37.30 share price, NiSource appears to be trading close to its estimated fair value. Analyst price target for NI is US$37.42, which is 6.2% above our fair value estimate. In this article we are going to estimate the intrinsic value of NiSource Inc.  by taking the forecast future cash flows of the company and discounting them back to today's value. This will be done using the Discounted Cash Flow  model. Before you think you won't be able to understand it, just read on!It's actually much less complex than you'd imagine.We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.Value Per Share = Expected Dividend Per Share / ","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","NI":"印北瓦电","NYSE":"纽交所","BK4585":"ETF&股票定投概念","BK4588":"碎股","BK4208":"复合型公用事业"},"translate_title":"NiSource Inc.（纽约证券交易所股票代码：NI）的公允价值一览","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DCF":1,"NI":1,"NYSE":1},"content_text":"Key Insights\n\n Using the Dividend Discount Model, NiSource fair value estimate is US$35.22 \n With US$37.30 share price, NiSource appears to be trading close to its estimated fair value \n  Analyst price target for NI is US$37.42, which is 6.2% above our fair value estimate \n\n In this article we are going to estimate the intrinsic value of NiSource Inc. (NYSE:NI) by taking the forecast future cash flows of the company and discounting them back to today's value. This will be done using the Discounted Cash Flow (DCF) model. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine. \n We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. \n See our latest analysis for NiSource \n Is NiSource Fairly Valued? \n As NiSource operates in the integrated utilities sector, we need to calculate the intrinsic value slightly differently. In this approach dividends per share (DPS) are used, as free cash flow is difficult to estimate and often not reported by analysts. Unless a company pays out the majority of its FCF as a dividend, this method will typically underestimate the value of the stock. The 'Gordon Growth Model' is used, which simply assumes that dividend payments will continue to increase at a sustainable growth rate forever. The dividend is expected to grow at an annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.6%. We then discount this figure to today's value at a cost of equity of 5.9%. Relative to the current share price of US$37.3, the company appears around fair value at the time of writing. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. \nValue Per Share = Expected Dividend Per Share / (Discount Rate - Perpetual Growth Rate)\n= US$1.2 / (5.9% – 2.6%)\n= US$35.2\n\n\n\n  NYSE:NI Discounted Cash Flow November 21st 2024\n \n\n The Assumptions \n The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at NiSource as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 5.9%, which is based on a levered beta of 0.800. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for NiSource\n\n\nStrength\n\nEarnings growth over the past year exceeded the industry.\n\n\nSee NI's revenue and earnings trends.\n\n\n\nWeakness\n\nEarnings growth over the past year is below its 5-year average.\n\n\nInterest payments on debt are not well covered.\n\n\nDividend is low compared to the top 25% of dividend payers in the Integrated Utilities market.\n\n\nExpensive based on P/E ratio and estimated fair value.\n\n\nShareholders have been diluted in the past year.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow for the next 3 years.\n\n\n\nThreat\n\nDebt is not well covered by operating cash flow.\n\n\nPaying a dividend but company has no free cash flows.\n\n\n Annual earnings are forecast to grow slower than the American market.\n\n\nIs NI well equipped to handle threats?\n\n\n\n Next Steps: \n Valuation is only one side of the coin in terms of building your investment thesis, and it ideally won't be the sole piece of analysis you scrutinize for a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to \"what assumptions need to be true for this stock to be under/overvalued?\" If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. For NiSource, there are three relevant items you should look at: \n\n Risks: Be aware that  NiSource is showing  3 warning signs in our investment analysis , and 1 of those doesn't sit too well with us... \n Future Earnings: How does NI's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. \n Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! \n\n PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.\nHave 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. 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