Is NiSource (NI) Still Undervalued Amid Steady Growth and Regulatory Stability?

NiSource (NI), a key player in the U.S. utility sector, has drawn significant attention in 2025 as it navigates a landscape of robust earnings growth, regulatory stability, and divergent valuation estimates. With a "Strong Buy" consensus rating from 14 analysts and a mean price target of $43.92-implying a 3.7% premium to its current stock price-the company appears to be a focal point for investors seeking exposure to the energy transition according to market analysis. However, the disparity between analyst optimism and discounted cash flow (DCF) model estimates raises critical questions about whether NiSource is truly undervalued or if its recent outperformance has already priced in future upside.

Analyst Valuations: A Bullish Outlook

Analysts have consistently highlighted NiSource's strong fundamentals. The company's 2025 adjusted EPS guidance of $1.85–$1.89, narrowed to the upper end of the range, reflects confidence in its operational execution. This aligns with a projected 7.4% year-over-year EPS growth for 2025, driven by grid modernization initiatives and expanding infrastructure investments. The stock's 36.2% return over the past 52 weeks further underscores its appeal, outperforming both the S&P 500 and the Utilities Select Sector SPDR Fund according to market data.

The analyst community's enthusiasm is evident in their price targets. The highest target of $48 implies a 13.3% upside, while the mean target of $43.92 suggests a more moderate but still compelling premium. These estimates are underpinned by NiSource's strategic focus on data center investments and its $28 billion capital expenditure plan for 2026–2033, which projects 8%-9% compound annual EPS growth through 2033.

DCF Models: A Cautious Counterpoint

Despite the bullish analyst narrative, DCF models present a more nuanced picture. The SWS DCF model calculates a fair value of $34.19 per share, indicating the stock is trading 29.8% above intrinsic value. Similarly, Alpha Spread's DCF model estimates a fair value of $38.09, suggesting a 9% overvaluation relative to the current price of $41.88. These models incorporate forecasted cash flows and risk-adjusted discount rates, though specific assumptions-such as growth rates or terminal multiples-remain opaque.

The divergence between DCF estimates and analyst targets highlights a key tension: while analysts emphasize top-line growth and regulatory tailwinds, DCF models may discount future cash flows more conservatively, reflecting uncertainties in the utility sector's evolving regulatory environment. For instance, NiSource's grid modernization projects, while promising, could face delays or cost overruns that impact long-term profitability.

Contrasting Valuations: Bridging the Gap

The gap between analyst optimism and DCF caution stems from differing assumptions about NiSource's growth trajectory and risk profile. Analysts appear to prioritize the company's aggressive capital expenditure plans and non-GAAP EPS guidance, which project 6%-8% annual growth through 2030. In contrast, DCF models may apply lower growth rates or higher discount rates to account for macroeconomic risks, such as inflationary pressures or potential regulatory shifts in energy policy according to model analysis.

Notably, one narrative-driven fair value estimate of $46.36-implying a 9.7% undervaluation-suggests that some models incorporate a more aggressive growth scenario, possibly factoring in NiSource's expanded $2.5 billion credit facility and its role in supporting decarbonization efforts according to financial analysis. This underscores the subjectivity inherent in valuation models and the importance of aligning assumptions with an investor's risk tolerance.

Risks and Upside: A Balanced Perspective

Investors must weigh NiSource's upside potential against several risks. On the positive side, the company's regulatory stability-bolstered by its focus on grid resilience and clean energy infrastructure-positions it to benefit from long-term secular trends. Its 2026–2033 capital plan, including $7 billion allocated to data center investments, further diversifies revenue streams and supports earnings growth.

However, the DCF models' overvaluation warnings cannot be ignored. A stock trading 9–29% above intrinsic value implies that any near-term earnings shortfalls or regulatory headwinds could trigger a re-rating. Additionally, the utility sector's low volatility historically makes sharp corrections more likely if growth expectations are not met.

Conclusion: A Case for Prudent Optimism

NiSource's valuation puzzle reflects the broader challenges of assessing utility stocks in a period of rapid energy transition. While analysts' price targets and the company's strong earnings trajectory justify a bullish stance, DCF models serve as a cautionary check, emphasizing the need for disciplined risk management. For investors, the key lies in aligning their time horizon with NiSource's growth narrative: those with a long-term perspective may find the current price justified by its regulatory tailwinds and capital-intensive projects, while shorter-term traders might monitor DCF-driven catalysts for potential entry points.

In the end, NiSource's story is one of balance-between growth and stability, optimism and caution. As the energy landscape evolves, its ability to execute on its strategic priorities will ultimately determine whether its valuation premium proves warranted.