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 the Firm (FCFF)

Microsoft Excel

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 the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

ONEOK Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 15.06%
01 FCFF0 2,193,185
1 FCFF1 2,178,712 = 2,193,185 × (1 + -0.66%) 1,893,596
2 FCFF2 2,218,454 = 2,178,712 × (1 + 1.82%) 1,675,814
3 FCFF3 2,314,030 = 2,218,454 × (1 + 4.31%) 1,519,259
4 FCFF4 2,471,205 = 2,314,030 × (1 + 6.79%) 1,410,131
5 FCFF5 2,700,442 = 2,471,205 × (1 + 9.28%) 1,339,285
5 Terminal value (TV5) 51,049,928 = 2,700,442 × (1 + 9.28%) ÷ (15.06% – 9.28%) 25,318,229
Intrinsic value of ONEOK Inc. capital 33,156,314
Less: Series E Preferred Stock (fair value) 20,000
Less: Debt and finance lease liability (fair value) 12,722,253
Intrinsic value of ONEOK Inc. common stock 20,414,061
 
Intrinsic value of ONEOK Inc. common stock (per share) $45.60
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.

Weighted Average Cost of Capital (WACC)

ONEOK Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 28,718,340 0.69 20.01%
Series E Preferred Stock (fair value) 20,000 0.00 5.50%
Debt and finance lease liability (fair value) 12,722,253 0.31 3.89% = 5.09% × (1 – 23.60%)

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

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 447,674,825 × $64.15
= $28,718,340,023.75

   Debt and finance lease liability (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (23.44% + 24.42% + 23.62% + 22.56% + 23.96%) ÷ 5
= 23.60%

WACC = 15.06%

FCFF Growth Rate (g)

FCFF 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)
Interest expense, net of capitalized interest 675,946 732,924 712,886 491,773 469,620
Net income attributable to ONEOK 1,722,221 1,499,706 612,809 1,278,577 1,151,703
 
Effective income tax rate (EITR)1 23.44% 24.42% 23.62% 22.56% 23.96%
 
Interest expense, net of capitalized interest, after tax2 517,504 553,944 544,502 380,829 357,099
Add: Preferred stock dividends 1,100 1,100 1,100 1,100 1,100
Add: Common stock dividends 1,670,725 1,666,751 1,605,000 1,457,831 1,335,211
Interest expense (after tax) and dividends 2,189,329 2,221,795 2,150,602 1,839,760 1,693,410
 
EBIT(1 – EITR)3 2,239,725 2,053,650 1,157,311 1,659,406 1,508,802
 
Current maturities of long-term debt 925,000 895,814 7,650 7,650 507,650
Short-term borrowings — — — 220,000 —
Current finance lease liability 2,954 2,584 2,153 1,949 1,765
Long-term debt, excluding current maturities 12,695,834 12,747,636 14,228,421 12,479,757 8,873,334
Noncurrent finance lease liability 19,299 21,082 22,143 24,296 26,244
Total ONEOK shareholders’ equity 6,493,885 6,015,163 6,042,398 6,225,951 6,579,543
Total capital 20,136,972 19,682,279 20,302,765 18,959,603 15,988,536
Financial Ratios
Retention rate (RR)4 0.02 -0.08 -0.86 -0.11 -0.12
Return on invested capital (ROIC)5 11.12% 10.43% 5.70% 8.75% 9.44%
Averages
RR -0.07
ROIC 9.09%
 
FCFF growth rate (g)6 -0.66%

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).

1 See details »

2022 Calculations

2 Interest expense, net of capitalized interest, after tax = Interest expense, net of capitalized interest × (1 – EITR)
= 675,946 × (1 – 23.44%)
= 517,504

3 EBIT(1 – EITR) = Net income attributable to ONEOK + Interest expense, net of capitalized interest, after tax
= 1,722,221 + 517,504
= 2,239,725

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [2,239,725 – 2,189,329] ÷ 2,239,725
= 0.02

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 2,239,725 ÷ 20,136,972
= 11.12%

6 g = RR × ROIC
= -0.07 × 9.09%
= -0.66%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (41,460,593 × 15.06% – 2,193,185) ÷ (41,460,593 + 2,193,185)
= 9.28%

where:

Total capital, fair value0 = current fair value of ONEOK Inc. debt and equity (US$ in thousands)
FCFF0 = the last year ONEOK Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of ONEOK Inc. capital

FCFF growth rate (g) forecast

ONEOK Inc., H-model

Microsoft Excel
Year Value gt
1 g1 -0.66%
2 g2 1.82%
3 g3 4.31%
4 g4 6.79%
5 and thereafter g5 9.28%

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)
= -0.66% + (9.28% – -0.66%) × (2 – 1) ÷ (5 – 1)
= 1.82%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -0.66% + (9.28% – -0.66%) × (3 – 1) ÷ (5 – 1)
= 4.31%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -0.66% + (9.28% – -0.66%) × (4 – 1) ÷ (5 – 1)
= 6.79%