Opinions
Stockchase Insights
Spire Inc.
SR-N
DON'T BUY
Dec 08, 2023
N/A
Stock price when the opinion was issued
Energy Infrastructure, Industrials & Utilities
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TOP PICK
Stockchase Research Editor: Michael O'Reilly Our Top Pick of SR is as much a seasonal play as it is about fundamental recovery. This natural gas company provides service to 1.8 million homes in Alabama, Missouri and Mississippi, is the 5th largest publicly traded natural gas company, and is viewed as providing essential services heading into the winter. Recent earnings were up 3% over the year and consensus calls for a 9% increase next year. We would trade this with a stop-loss at $50. Yield 4.54% (Analysts’ price target is $72.89)
Energy Infrastructure, Industrials & Utilities
PAST TOP PICK
(A Top Pick Oct 08/20, Up 31.5%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with SR has reached analyst expecations at $73. To remain disciplined, we recommend covering 50% of the position and trailing up the stop (from $50) to $65. If triggerd, this would all but guarantee a minimum investment return over 24%.
Energy Infrastructure, Industrials & Utilities
PAST TOP PICK
(A Top Pick Oct 08/20, Up 17%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with SR has triggered its stop at $65. We recommend covering the position at this time. Combined with the previous recommendation to cover half the position upon reaching our initial objective, this results in a net investment return of 24%.
Energy Infrastructure, Industrials & Utilities
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SPIR is down 17% year-to-date and 35% on a one-year timeframe. It is a smaller name with a market cap of $133M, and its sales growth has been impressive, and it is expected to grow its sales nicely in the coming years. It is not profitable and does not generate positive free cash flows. It operates at an ~$80M free cash flow loss each year and has a net debt balance of $113.4M. Its interest expenses are ramping up ($25M in the past 12 months), and this will delay the time until it is profitable. With a small market cap, a high debt load, and negative free cash flow, we feel the risks are tilted against an investors' favour, and we would prefer to wait until this name can generate positive free cash flow or reduce its debt load before reconsidering.
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