ONEOK Inc (OKE)

Conclusion

ONEOK is a US midstream operator. It gathers and processes natural gas, handles natural gas liquids, runs pipelines and storage, and transports refined products. At 85.98 USD on 2026-11-09, the market capitalisation is 54.2 billion USD.

The verdict is undervalued. Today's multiples sit below their own ten-year medians: the price-to-earnings ratio is 13.3 against a median of 18.8, and enterprise value to EBITDA is 10.3 against 13.0. The DCF gives 136.20 USD per share at a discount rate of 8.87%, and the fair value from historical multiples is 121.15 USD. The fair value band runs from 102.94 to 154.41 USD with a midpoint of 128.68 USD, giving a margin of safety of 49.7% at the current price. The reverse DCF implies growth of 6.3% a year, while five-year revenue growth delivered was 31.8%.

What holds the case up: ROIC of 9.7% against a WACC of 7.4%, free cash flow conversion of 95.0% over five years, and a five-year revenue growth rate of 31.8%. What could break it: an Altman Z-score of 1.69 in the distress zone, net debt to EBITDA of 3.54, and a share count that has risen 7.9% a year over five years. The estimated next-year EPS change of -0.9% also weighs on the case.

Financial health

Financial strength is red, held down by the Altman Z-score of 1.69, which is assessed as bad, while the other measures are neutral. The current ratio is 0.84 and the quick ratio 0.59, so short-term liquidity is thin. Net debt to EBITDA is 3.54, debt to equity 1.22, and interest coverage 3.71. The Altman Z-score sits in the distress zone, but that model was designed for manufacturers, and ONEOK is a midstream operator, so the reading should be treated with care. Insolvency risk: low, about 0.7% by the estimate of the Ohlson model over one to two years.

Earnings quality

Earnings quality is yellow: the free cash flow conversion is good, but the share count rise and the Piotroski score of 6 out of 9 hold it back. Free cash flow conversion is 62.1% on a trailing twelve-month basis and 95.0% over five years. The accrual ratio is -0.0337, meaning reported earnings sit below cash generation. Free cash flow after stock-based compensation is 2.53 billion USD, but the company's stock-based compensation figure is not available. The share count has grown at 7.9% a year over five years, so there are no net buybacks. The Beneish M-score is not available. The company beat estimates in six of the last eight quarters, with an average surprise of 6.7%. Current-year estimates have risen 11.2% over 90 days, but next-year estimates have fallen 1.6%.

Profitability

Profitability is green, supported by ROIC of 9.7% against a WACC of 7.4%, a gap of 2.2 percentage points as given. The gross margin is 19.7% against a ten-year median of 18.6%, the operating margin 16.9% against 17.5%, and the net margin 9.4% against 8.9%. The operating margin is therefore slightly below its median, although it is still assessed as good. Return on equity is 17.5%. The DuPont split shows a net margin of 10.1%, an asset turnover of 0.50 and an equity multiplier of 2.96, so much of the equity return comes from leverage rather than from the operating business alone.

Growth

Growth is yellow: revenue and earnings per share growth are strong over five years, but next year's estimate points down. Revenue has compounded at 13.7% over three years, 31.8% over five years and 15.9% over ten years. Earnings per share have compounded at 11.9% over three years, 30.5% over five years and 16.5% over ten years. Revenue grew in seven of the last ten years. Free cash flow per share has grown at only 0.7% a year over three years, which is far below the growth in revenue and earnings. The estimated EPS change for next year is -0.9%, assessed as bad.

Valuation

Valuation is green, because the verdict is undervalued and the margin of safety is 49.7%. Current multiples sit below their ten-year medians: price to earnings 13.3 against 18.8, a premium of -29.0%; enterprise value to EBITDA 10.3 against 13.0, a premium of -21.0%; price to sales 1.26 against 2.08, a premium of -39.5%; and price to book 2.32 against 3.67, a premium of -36.7%. Price to free cash flow is 21.4 against a median of 18.4, a premium of 16.5%. The DCF gives 136.20 USD per share, using a discount rate of 8.87% and a long-term growth rate of 2.5%. The fair value band runs from 102.94 to 154.41 USD, with a midpoint of 128.68 USD. This is an order of magnitude built on fixed assumptions, not a price target. The reverse DCF implies growth of 6.3% against five-year revenue growth of 31.8%. The dividend yield is 4.9%, but dividends paid equal 105.6% of free cash flow.

Risks

The main risk is leverage. Net debt to EBITDA of 3.54 and interest coverage of 3.71 leave limited room if earnings fall, and the Altman Z-score of 1.69 signals financial stress. A dividend payout of 105.6% of free cash flow would be hard to sustain if cash generation weakens. Continued share count growth of 7.9% a year would dilute per-share value, and the free cash flow per share growth of 0.7% over three years shows that this has not been offset. The next-year EPS estimate of -0.9% points to a slowdown. Stock-based compensation and the Beneish M-score are not available. The analysis has no debt maturity schedule and no revenue by segment, so refinancing risk and the split between business lines cannot be assessed.