If you have ever wondered whether NiSource's stock is trading at a fair price or if there is hidden value still on the table, you are not alone. Uncovering this is exactly what this article is all about.
NiSource has seen some impressive moves lately, with the stock rising 3.2% in the last week, 21.4% year-to-date, and a striking 117.9% gain over the past five years.
Recently, NiSource has featured in news headlines for its ongoing grid modernization projects and a steady push towards clean energy, which investors hope will help drive long-term growth. These positive developments are playing into the company's stock momentum, but they also introduce new considerations for risk and future valuation.
According to our valuation framework, NiSource's current value score is 0/6, indicating it is not undervalued on any of our checks right now. Let's dig into what this means by examining popular valuation methods. Stay tuned, because we will share an even sharper way to evaluate the company's worth by the end of the article.
NiSource scores just 0/6 on our valuation checks.
Approach 1: NiSource Dividend Discount Model (DDM) Analysis
The Dividend Discount Model (DDM) is a valuation approach that estimates a stock's intrinsic value based on projections of future dividend payments. It is especially useful for utility companies like NiSource, which tend to pay reliable and growing dividends. By factoring in the current dividend per share, expected growth rate, and required rate of return, DDM provides a snapshot of whether the stock price reflects the underlying stream of shareholder payouts.
For NiSource, the model uses a dividend per share of $1.26, a return on equity of 9.1%, and a payout ratio just over 61%. The growth rate of future dividends is capped at 3.26%, slightly below some longer-term forecasts but still reflecting a steady upward trajectory. These figures suggest that the company can continue to support and possibly grow its dividend given its earnings profile and payout strategy.
Based on DDM, Simply Wall St calculates an intrinsic value of $34.00 per share. Given the current stock price, NiSource appears 29.8% overvalued using this method. In other words, the current market enthusiasm may be pushing the price above what future dividends can justify.
Result: OVERVALUED
Our Dividend Discount Model (DDM) analysis suggests NiSource may be overvalued by 29.8%.