Is Spire (SR) Fairly Valued After Its Recent Share Price Surge?

The recent share price surge in Spire Inc. (NYSE: SR) has sparked renewed interest among investors, with the stock trading at $88.11 as of October 22, 2025, up from earlier levels. However, the question of whether this valuation is justified requires a nuanced analysis of both analyst fair value estimates and discounted cash flow (DCF) model insights. This article examines the interplay between these two valuation approaches, highlighting key divergences and their implications for investors.

Analyst Fair Value Estimates: A Mixed Picture

Analysts have issued a range of price targets for Spire, reflecting both optimism and caution. Morgan Stanley has set a one-year target of $91, implying a 4.59% upside from the October 22 closing price, according to a Financial Modeling Prep analysis. Bank of America (B of A) upgraded its rating to "Neutral" in late October, raising its target to $89 from $76, as noted in a Nasdaq article. These upgrades are attributed to positive regulatory developments in Missouri (SB6 legislation) and the anticipated acquisition of a Tennessee gas local distribution company (LDC), which could bolster earnings per share (EPS) growth toward the upper end of Spire's 5%-7% target range, per the Nasdaq article.

However, the consensus view remains more cautious. As of September 30, 2025, the average analyst price target stands at $81.96, representing a 6.98% downside from the recent closing price, according to the Nasdaq article. This divergence underscores uncertainty about Spire's ability to sustain its growth trajectory amid financial challenges, including a high debt-to-equity ratio of 1.41 and a low interest coverage ratio of 2.79, as noted in a SimplyWall St. analysis.

DCF Model Insights: Conservative Assumptions and Structural Risks

The DCF model provides a more granular view of Spire's valuation, relying on explicit assumptions about growth, risk, and cash flow sustainability. According to GuruFocus, the model typically applies a discount rate derived from the 10-Year Treasury Constant Maturity Rate (rounded up) plus a 6% equity risk premium, resulting in a range of 10%-20%. The terminal growth rate is set at 4%, aligned with long-term inflation expectations, according to GuruFocus.

Applying these parameters to Spire's recent financials reveals structural risks. While the company exceeded Q3 2025 earnings expectations (EPS of $0.01 vs. a projected loss of $0.09) and reported $421.90 million in revenue, as noted in a MarketBeat alert, its FY 2025 guidance of $4.40-$4.60 EPS implies a reliance on regulatory tailwinds rather than organic growth. The DCF model's conservative assumptions-particularly the 4% terminal growth rate-contrast sharply with Spire's projected 5%-7% EPS growth, creating a potential undervaluation if the company meets its higher-end targets.

Contrasting Analyst Optimism with DCF Realism

The disconnect between analyst estimates and DCF-derived valuations stems from differing assumptions about risk and growth. Analysts appear to price in regulatory tailwinds and the Tennessee LDC acquisition as near-certain catalysts, while the DCF model incorporates a higher discount rate to account for Spire's elevated debt load and interest coverage concerns. For instance, the average analyst target of $81.96 implies a price-to-earnings (P/E) ratio of approximately 17.3, whereas Spire's current P/E of 18.72 suggests the market is pricing in stronger earnings growth than the DCF model's conservative projections, per the SimplyWall St. analysis.

This divergence is further amplified by seasonal and regulatory volatility. Spire's Gas Utility segment, which accounts for most of its revenue, is subject to weather-related fluctuations and regulatory changes that could disrupt cash flow projections, as noted in the SimplyWall St. analysis. While the DCF model's 4% terminal growth rate accounts for long-term inflation, it may understate the impact of short-term regulatory shifts or operational risks.

Implications for Investors

For investors, the key takeaway is that Spire's valuation lies in a gray area between optimism and caution. The recent price surge reflects confidence in regulatory and strategic developments, but the DCF model's conservative assumptions highlight structural vulnerabilities. Investors bullish on Spire's regulatory and acquisition-driven growth may find the current price justified, particularly if the Tennessee LDC acquisition and SB6 legislation deliver as expected. However, those prioritizing financial stability may view the stock as overvalued given its debt profile and the DCF model's lower intrinsic value estimates.

The upcoming release of Spire's Q4 2025 financial results on November 14, 2025, will be critical in resolving these uncertainties. Stronger-than-expected cash flow growth or a reduction in debt risk could narrow the gap between analyst optimism and DCF realism, while missed targets could exacerbate the divide.

Conclusion

Spire's valuation post-surge is neither clearly overvalued nor undervalued but sits in a transitional phase shaped by regulatory momentum and financial risks. Analysts' price targets reflect a belief in near-term catalysts, while the DCF model underscores the need for caution. Investors must weigh these perspectives against their risk tolerance and time horizon, recognizing that Spire's path to fair value will depend on its ability to execute on strategic initiatives and manage its debt burden effectively.