DCF Studio

    OKE · NYQ · Energy

    ONEOK, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 147.62

    Market price

    USD 93.46

    Implied upside

    +58.0%

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

    AdjustedCapital expenditure runs at 8.3% of revenue against depreciation of 4.2%. 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 147.62+58.0%
    Exit multiple
    USD 207.23+121.7%
    Market price
    USD 93.46

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn4bn7bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 38.5bnUSD 44.1bnUSD 50.5bnUSD 57.9bnUSD 66.3bn+14.5%
    EBITUSD 7.4bnUSD 8.5bnUSD 9.7bnUSD 11.2bnUSD 12.8bn+14.5%
    NOPATUSD 5.9bnUSD 6.7bnUSD 7.7bnUSD 8.8bnUSD 10.1bn+14.5%
    Add depreciation & amortisationUSD 1.6bnUSD 1.9bnUSD 2.1bnUSD 2.4bnUSD 2.8bn+14.5%
    Less capital expenditureUSD -3.2bnUSD -3.6bnUSD -4.2bnUSD -4.8bnUSD -5.5bn+14.5%
    Less increase in working capitalUSD -155.6mUSD -178.2mUSD -204.1mUSD -233.7mUSD -267.7m+14.5%
    Free cashflow to firmUSD 4.1bnUSD 4.8bnUSD 5.4bnUSD 6.2bnUSD 7.1bn+14.5%
    Discount factor0.96390.89560.83210.77310.7183-
    Present valueUSD 4.0bnUSD 4.3bnUSD 4.5bnUSD 4.8bnUSD 5.1bn+6.4%
    Present Value Of The ForecastUSD 22.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.812Reported 0.719, pulled toward 1.0 (Blume)
    Cost of equity9.46%Risk-free + beta x equity risk premium
    Cost of debt5.50%Interest expense / average total debt
    Market capitalisationUSD 58.9bn64.2% of capital
    Total debtUSD 32.8bn35.8% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.63%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 147.62

    82% of EV

    Forecast FCFF, final year
    USD 7.1bn
    Capex at depreciation, working capital in reinvestment
    USD 10.1bn
    Less reinvestment at g/ROIC (29.3% of NOPAT)
    USD -3.0bn
    Capitalised
    USD 7.1bn
    ROIC (reported)
    8.5%
    Terminal value, undiscounted
    USD 142.6bn
    Terminal value, discounted
    USD 102.4bn
    Enterprise value
    USD 125.1bn
    Less net debt
    USD 32.7bn
    Equity value
    USD 92.4bn

    Exit at 12.5x EBITDA

    Value per shareUSD 207.23

    86% of EV

    Terminal value, undiscounted
    USD 194.5bn
    Terminal value, discounted
    USD 139.7bn
    Enterprise value
    USD 162.4bn
    Less net debt
    USD 32.7bn
    Equity value
    USD 129.7bn

    Spread between methods: 34%.

    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%
    5.63%241.08256.93277.61305.87347.04
    6.63%181.86188.62196.85207.15220.52
    7.63%142.05144.65147.62151.09155.23
    8.63%113.78114.42115.07115.71116.35
    9.63%94.6595.2195.7696.3196.87

    Outlined: this model. Green text: above today's price of 93.46. 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 year14.5%6.9%-7.6pp
    EBIT margin19.3%14.4%-4.9pp
    Discount rate7.6%9.8%+2.1pp
    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.