Stock Analysis on Net
Stock Analysis on Net

ONEOK Inc. (NYSE:OKE)

This company has been moved to the archive! The financial data has not been updated since August 8, 2023.

Present Value of Free Cash Flow to Equity (FCFE)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

ONEOK Inc., free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 20.01%
01 FCFE0 1,677,477
1 FCFE1 1,644,576 = 1,677,477 × (1 + -1.96%) 1,370,355
2 FCFE2 1,675,427 = 1,644,576 × (1 + 1.88%) 1,163,279
3 FCFE3 1,771,147 = 1,675,427 × (1 + 5.71%) 1,024,689
4 FCFE4 1,940,301 = 1,771,147 × (1 + 9.55%) 935,375
5 FCFE5 2,200,065 = 1,940,301 × (1 + 13.39%) 883,754
5 Terminal value (TV5) 37,665,018 = 2,200,065 × (1 + 13.39%) ÷ (20.01% – 13.39%) 15,129,831
Intrinsic value of ONEOK Inc. common stock 20,507,283
 
Intrinsic value of ONEOK Inc. common stock (per share) $45.81
Current share price $64.15

Based on: 10-K (reporting date: 2022-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.62%
Expected rate of return on market portfolio2 E(RM) 13.69%
Systematic risk of ONEOK Inc. common stock βOKE 1.70
 
Required rate of return on ONEOK Inc. common stock3 rOKE 20.01%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rOKE = RF + βOKE [E(RM) – RF]
= 4.62% + 1.70 [13.69% – 4.62%]
= 20.01%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

ONEOK Inc., PRAT model

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Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in thousands)
Common stock dividends 1,670,725 1,666,751 1,605,000 1,457,831 1,335,211
Preferred stock dividends 1,100 1,100 1,100 1,100 1,100
Net income attributable to ONEOK 1,722,221 1,499,706 612,809 1,278,577 1,151,703
Revenues 22,386,892 16,540,309 8,542,242 10,164,367 12,593,196
Total assets 24,379,094 23,621,613 23,078,754 21,812,121 18,231,671
Total ONEOK shareholders’ equity 6,493,885 6,015,163 6,042,398 6,225,951 6,579,543
Financial Ratios
Retention rate1 0.03 -0.11 -1.62 -0.14 -0.16
Profit margin2 7.69% 9.06% 7.16% 12.57% 9.14%
Asset turnover3 0.92 0.70 0.37 0.47 0.69
Financial leverage4 3.75 3.93 3.82 3.50 2.77
Averages
Retention rate -0.10
Profit margin 9.12%
Asset turnover 0.63
Financial leverage 3.56
 
FCFE growth rate (g)5 -1.96%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

1 Retention rate = (Net income attributable to ONEOK – Common stock dividends – Preferred stock dividends) ÷ (Net income attributable to ONEOK – Preferred stock dividends)
= (1,722,221 – 1,670,725 – 1,100) ÷ (1,722,221 – 1,100)
= 0.03

2 Profit margin = 100 × (Net income attributable to ONEOK – Preferred stock dividends) ÷ Revenues
= 100 × (1,722,221 – 1,100) ÷ 22,386,892
= 7.69%

3 Asset turnover = Revenues ÷ Total assets
= 22,386,892 ÷ 24,379,094
= 0.92

4 Financial leverage = Total assets ÷ Total ONEOK shareholders’ equity
= 24,379,094 ÷ 6,493,885
= 3.75

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= -0.10 × 9.12% × 0.63 × 3.56
= -1.96%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (28,718,340 × 20.01% – 1,677,477) ÷ (28,718,340 + 1,677,477)
= 13.39%

where:
Equity market value0 = current market value of ONEOK Inc. common stock (US$ in thousands)
FCFE0 = the last year ONEOK Inc. free cash flow to equity (US$ in thousands)
r = required rate of return on ONEOK Inc. common stock

FCFE growth rate (g) forecast

ONEOK Inc., H-model

Microsoft Excel
Year Value gt
1 g1 -1.96%
2 g2 1.88%
3 g3 5.71%
4 g4 9.55%
5 and thereafter g5 13.39%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -1.96% + (13.39% – -1.96%) × (2 – 1) ÷ (5 – 1)
= 1.88%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -1.96% + (13.39% – -1.96%) × (3 – 1) ÷ (5 – 1)
= 5.71%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -1.96% + (13.39% – -1.96%) × (4 – 1) ÷ (5 – 1)
= 9.55%