Intrinsic Value NiSource Inc. (0K87.L)

• Previous Close: £43.86
• Intrinsic Value: £17.92
• Upside potential: -59%

Stock Valuation Context

Business Model And Market Position

NiSource Inc. is a regulated energy holding company operating in the U.S. utility sector, providing natural gas and electricity to residential, commercial, and industrial customers across multiple states. The company’s Gas Distribution Operations segment serves approximately 2.4 million customers in Ohio, Pennsylvania, Virginia, Kentucky, and Maryland, while its Electric Operations segment delivers power to roughly 483,000 customers in northern Indiana. NiSource maintains a robust infrastructure, including over 54,600 miles of gas distribution pipelines and a diverse generation portfolio featuring coal, natural gas, hydro, and wind assets. As a regulated utility, NiSource benefits from stable cash flows underpinned by long-term rate structures, though it remains exposed to regulatory oversight and capital-intensive infrastructure demands. The company’s strategic focus on decarbonization—evidenced by its wind generation investments—positions it to navigate the energy transition while leveraging its entrenched market presence in the Midwest and Mid-Atlantic regions.

Revenue Profitability And Efficiency

NiSource reported revenue of $5.46 billion for the period, with net income of $758.8 million, reflecting a net margin of approximately 13.9%. Operating cash flow stood at $1.78 billion, though capital expenditures of $2.61 billion highlight the company’s heavy investment in infrastructure. The diluted EPS of $1.62 underscores steady earnings generation, typical of a regulated utility with predictable demand.

Earnings Power And Capital Efficiency

The company’s earnings are supported by its regulated operations, which provide consistent returns on invested capital. However, the high capex burden ($2.61 billion) relative to operating cash flow ($1.78 billion) indicates significant reinvestment needs, limiting near-term free cash flow. NiSource’s asset base, including 722 MW of coal and 563 MW of gas generation, contributes to stable but aging capacity.

Balance Sheet And Financial Health

NiSource’s financial health is moderated by substantial total debt of $13.99 billion against cash reserves of $198.6 million, reflecting leverage typical of capital-intensive utilities. The company’s regulated revenue streams help service this debt, but its balance sheet remains sensitive to interest rate fluctuations and regulatory approvals for rate recovery.

Growth Trends And Dividend Policy

Growth is driven by rate-base expansion and renewable energy investments, such as its 302 MW wind capacity. The dividend payout of $1.09 per share aligns with the sector’s income-oriented profile, though yield sustainability depends on regulatory support for capex recovery and earnings growth.

Valuation And Market Expectations

With a market cap of $18.34 billion and a beta of 0.535, NiSource trades as a low-volatility utility stock. Investors likely price in steady, regulated returns, with valuation metrics reflecting its stable but modest growth prospects in a transitioning energy landscape.

Strategic Advantages And Outlook

NiSource’s key advantages include its regulated monopoly positions and diversified energy mix. The outlook hinges on successful execution of its decarbonization strategy, regulatory cooperation, and infrastructure modernization, though challenges like coal phase-outs and rising capex demands persist.

Sources

Company description, financial data from public filings (10-K), and market data from LSE.