Spire Inc Valuation – Initial Coverage $SR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Spire Inc (SR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Spire Inc., formerly The Laclede Group, Inc., is engaged to transform its business and pursue growth by growing its gas utility business through prudent investment in infrastructure upgrades and organic growth initiatives; acquire and integrate gas utilities; modernize its gas assets, and invest in innovation. The Company has two business segments, which include gas utility and gas marketing. The gas utility segment includes the regulated operations of Laclede Gas Company (Laclede Gas), Alabama Gas Corporation (Alagasco) and EnergySouth, Inc. (EnergySouth). The gas marketing segment includes Laclede Energy Resources, Inc. (LER), a subsidiary engaged in the marketing of natural gas and related activities on a non-regulated basis. Laclede Gas is engaged in the purchase, retail distribution and sale of natural gas, serving residential, commercial and industrial customers, through Missouri Gas Energy (MGE), Kansas City and western Missouri.

SR Chart

SR data by YCharts

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[otw_shortcode_button href=”https://www.moderngraham.com/moderngraham-stocks-screens/” size=”medium” icon_position=”left” shape=”square”]Learn More About Premium Membership[/otw_shortcode_button]


Downloadable PDF version of this valuation:

ModernGraham Valuation of SR – February 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,931,309,753 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.61 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 11.24% Fail
6. Moderate PEmg Ratio PEmg < 20 20.48 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.62 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.61 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.46 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.11
MG Growth Estimate 3.62%
MG Value $48.96
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $45.10
MG Value based on 0% Growth $26.44
Market Implied Growth Rate 5.99%
Current Price $63.70
% of Intrinsic Value 130.11%

Spire Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.51 in 2013 to an estimated $3.11 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.99% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Spire Inc revealed the company was trading above its Graham Number of $55.62. The company pays a dividend of $1.96 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.48, which was below the industry average of 23.36, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-80.91.

Spire Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$80.91
Graham Number $55.62
PEmg 20.48
Current Ratio 0.61
PB Ratio 1.62
Current Dividend $1.96
Dividend Yield 3.08%
Number of Consecutive Years of Dividend Growth 14


Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $815,600,000
Total Current Liabilities $1,342,200,000
Long-Term Debt $1,821,300,000
Total Assets $6,310,100,000
Intangible Assets $1,161,400,000
Total Liabilities $4,513,400,000
Shares Outstanding (Diluted Average) 45,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.50
Sep2016 $3.24
Sep2015 $3.16
Sep2014 $2.35
Sep2013 $2.02
Sep2012 $2.79
Sep2011 $2.86
Sep2010 $2.43
Sep2009 $2.89
Sep2008 $3.58
Sep2007 $2.31
Sep2006 $2.30
Sep2005 $0.02
Sep2004 $0.02
Sep2003 $1.82
Sep2002 $1.18
Sep2001 $1.61
Sep2000 $1.37
Sep1999 $1.43
Sep1998 $1.58
Sep1997 $1.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.11
Sep2016 $2.85
Sep2015 $2.65
Sep2014 $2.42
Sep2013 $2.51
Sep2012 $2.80
Sep2011 $2.81
Sep2010 $2.76
Sep2009 $2.69
Sep2008 $2.27
Sep2007 $1.51
Sep2006 $1.10
Sep2005 $0.64
Sep2004 $1.03
Sep2003 $1.52
Sep2002 $1.39
Sep2001 $1.52

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

Superior Plus Corp Valuation – Initial Coverage $TSE:SPB
Energy Company of Minas Valuation – Initial Coverage $CIG
NextEra Energy Inc Valuation – December 2016 $NEE
Westar Energy Inc Valuation – August 2016 $WR
Eversource Energy Valuation – August 2016 $ES
Public Service Enterprise Group Inc Valuation – August 2016 $PEG
NiSource Inc Valuation – August 2016 $NI
Consolidated Edison Inc Valuation – August 2016 $ED
Ameren Corp Valuation – August 2016 $AEE
PG&E Corp Valuation – July 2016 $PCG


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.