DCF Studio

    NI · NYQ · Utilities

    NiSource Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 0.56

    Market price

    USD 40.58

    Implied upside

    -98.6%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis model values the shares at 1.4% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 45.4% of revenue against depreciation of 16.8%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 0.56-98.6%
    Exit multiple
    USD 23.56-41.9%
    Market price
    USD 40.58

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -696961911-3484809550FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 6.9bnUSD 7.2bnUSD 7.5bnUSD 7.9bnUSD 8.2bn+4.3%
    EBITUSD 1.7bnUSD 1.8bnUSD 1.8bnUSD 1.9bnUSD 2.0bn+4.3%
    NOPATUSD 1.4bnUSD 1.5bnUSD 1.5bnUSD 1.6bnUSD 1.7bn+4.3%
    Add depreciation & amortisationUSD 1.2bnUSD 1.2bnUSD 1.3bnUSD 1.3bnUSD 1.4bn+4.3%
    Less capital expenditureUSD -3.1bnUSD -3.3bnUSD -3.4bnUSD -3.6bnUSD -3.7bn+4.3%
    Less increase in working capitalUSD -13.6mUSD -14.2mUSD -14.8mUSD -15.5mUSD -16.1m+4.3%
    Free cashflow to firmUSD -588.5mUSD -613.9mUSD -640.4mUSD -668.1mUSD -697.0m-4.3%
    Discount factor0.96810.90740.85060.79720.7473-
    Present valueUSD -569.7mUSD -557.1mUSD -544.7mUSD -532.6mUSD -520.8m+2.2%
    Present Value Of The ForecastUSD -2.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.692Reported 0.540, pulled toward 1.0 (Blume)
    Cost of equity8.80%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 19.5bn54.6% of capital
    Total debtUSD 16.2bn45.4% of capital, book value as a proxy
    Tax rate16.9%Effective, capped at statutory
    WACC6.69%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 0.56

    117% of EV

    Forecast FCFF, final year
    USD -697.0m
    Capex at depreciation, working capital in reinvestment
    USD 1.7bn
    Less reinvestment at g/ROIC (37.4% of NOPAT)
    USD -623.2m
    Capitalised
    USD 1.0bn
    ROIC (WACC floor)
    6.7%
    Terminal value, undiscounted
    USD 25.6bn
    Terminal value, discounted
    USD 19.1bn
    Enterprise value
    USD 16.4bn
    Less net debt
    USD 16.1bn
    Equity value
    USD 265.0m

    Exit at 11.9x EBITDA

    Value per shareUSD 23.56

    110% of EV

    Terminal value, undiscounted
    USD 40.2bn
    Terminal value, discounted
    USD 30.0bn
    Enterprise value
    USD 27.3bn
    Less net debt
    USD 16.1bn
    Equity value
    USD 11.2bn

    Spread between methods: 191%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.69%26.0828.8232.7038.7149.57
    5.69%9.069.309.549.7910.03
    6.69%0.170.360.560.750.95
    7.69%-6.31-6.15-5.99-5.82-5.66
    8.69%-11.21-11.07-10.93-10.79-10.66

    Outlined: this model. Green text: above today's price of 40.58. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year4.3%20.9%+16.6pp
    EBIT margin24.5%42.6%+18.1pp
    Discount rate6.7%4.5%-2.2pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.