Is NiSource (NI) Undervalued On Q2 Results And New Data Center Contracts?

NiSource (NI) has drawn fresh attention after its second quarter results showed lower adjusted earnings per share, while management reaffirmed long term targets and highlighted newly approved data center contracts with Amazon and Alphabet.

See our latest analysis for NiSource.

NiSource’s share price has softened in recent months, with a 30 day share price return of down 7.85% and a 90 day share price return of down 10.65%. At the same time, the 1 year total shareholder return of 4.30% and very large 5 year total shareholder return of 96.71% point to much stronger long term rewards and suggest that recent earnings pressure and new data center and funding announcements are being weighed against a longer history of value creation.

If NiSource’s data center push has you thinking about where infrastructure and power demand could head next, it is worth scanning 39 power grid technology and infrastructure stocks

After a softer quarter and a recent pullback, NiSource is still leaning into big ticket data center growth and fresh funding. Is that already reflected in the current share price, or is there meaningful upside still on the table?

Most Popular Narrative: 15.3% Undervalued

NiSource’s most followed narrative points to a fair value of $50.03 per share compared with the last close at $42.37. That gap rests on a detailed view of long term earnings and regulated returns.

Strong visibility into multi-year, rate-based capital expenditure ($19.4B base plan, plus $2B+ in upside/incremental projects) positions NiSource for 6 to 8% annual EPS growth and compound growth in regulated revenue.

Read the complete narrative. Read the complete narrative.

Want to understand what the market might be missing on NiSource. The narrative leans heavily on regulated capital plans, rising margins and a higher future earnings multiple. The exact mix of revenue growth, profitability and discounting assumptions is where the story gets interesting.

Result: Fair Value of $50.03 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, the NiSource narrative could be tested if regulators slow or reject key rate cases, or if long term gas demand weakens faster than expected.

Find out about the key risks to this NiSource narrative.

Another View on NiSource’s Valuation

The narrative around NiSource leans on long term earnings and regulated returns, yet the SWS DCF model tells a different story. On that basis, an estimated value of $36.01 per share sits below the current $42.37 price, which points to the stock trading above this cash flow view. Which lens do you find more convincing?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out NiSource for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 53 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Given the mixed signals around NiSource, it makes sense to move quickly, review the underlying data, and assess the balance of risk and reward for yourself. To see how current concerns and potential upside compare in one place, take a look at the 2 key rewards and 3 important warning signs.

Looking for more investment ideas beyond NiSource?

If NiSource has sharpened your thinking, do not stop here. Use the Simply Wall Street Screener to spot fresh opportunities that match your investing style.

• Target reliable income streams by reviewing companies in the 10 dividend fortresses that may suit long term dividend goals.
• Hunt for quality at a reasonable price by scanning the 53 high quality undervalued stocks that combine fundamentals with attractive valuations.
• Prioritise stability by checking the 80 resilient stocks with low risk scores that score well on resilience and risk controls.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com