Williams Companies Inc (WMB)

Conclusion

Williams Companies Inc operates US energy infrastructure, including interstate natural gas pipelines, gas gathering and processing, and natural gas marketing. At 66.45 USD on 9 November 2026, the company has a market capitalisation of 83.1 billion USD and an enterprise value of 115.3 billion USD.

The verdict is overvalued. Against their own ten-year medians, the P/E of 26.6x sits just below its median of 27.1x, while EV/EBITDA of 14.8x is above its median of 13.8x, and P/B of 5.3x is well above its median of 3.3x. The fair value band runs from 40.82 to 61.24 USD with a midpoint of 51.03 USD, giving a margin of safety of -23.2% at the current price. The DCF value per share is not available in the data, and neither is the growth implied by the reverse DCF. For comparison, revenue compounded at 9.1% over five years but only 2.9% over three, while EPS compounded at 65.3% over five years and 8.6% over three.

What holds the case up is a very high operating margin of 39.6% against a ten-year median of 26.1%, a Piotroski score of 7 out of 9, and five-year free cash flow conversion of 104.3%. What could break it is leverage and cash generation: net debt to EBITDA of 4.1x, trailing free cash flow conversion of -53.8%, and an Altman Z-score of 1.18 in the distress zone. The current ratio of 0.75 adds to the pressure on short-term liquidity.

Financial health

Financial strength is red, held back by a current ratio of 0.75, net debt to EBITDA of 4.1x and an Altman Z-score of 1.18, while interest coverage of 3.6x is neutral. The quick ratio is 0.61 and debt to equity is 2.16x. The Altman model was designed for manufacturers, and Williams is not one, so its zone is indicative only. Insolvency risk: low, about 1.3% by the estimate of the Ohlson model over one to two years, based on balance sheet data as of 31 December 2025. Debt has shrunk slightly over five years, with debt growing 3.5% a year less than revenue. The company does not report its interest expense, so the interest coverage figure relies on the TTM basis that is available. The balance sheet is stretched, but the low estimated insolvency risk and the stable interest coverage offset some of the concern.

Earnings quality

Earnings quality is green, supported by a Piotroski score of 7 out of 9, a Beneish M-score of -2.47 that is consistent with no sign of manipulation, and five-year free cash flow conversion of 104.3%. The trailing twelve-month conversion is -53.8%, and free cash flow after stock-based compensation is -1.77 billion USD, which is a clear weakness. The accrual ratio is -5.8%, which is favourable. Stock-based compensation is 0.7% of revenue, and the five-year share count change is 0.1% a year, so there are no buybacks shrinking the share base. Over the last eight quarters, the company beat estimates three times and missed five times, with an average surprise of 1.3%. Analysts have cut the current year EPS estimate by 2.0% over 90 days, with five downgrades against two upgrades in the last 30 days.

Profitability

Profitability is green. The gross margin of 61.3% is above its ten-year median of 51.8%, the operating margin of 39.6% compares with a median of 26.1%, and the net margin of 25.0% compares with a median of 16.5%. Operating margin stability is 0.43. ROIC of 8.6% against a WACC of 7.4% gives a ROIC minus WACC value of 1.3%, which is neutral. The five-year median ROIC is 8.4%. The DuPont split shows a net margin of 21.9%, an asset turnover of 0.20 and an equity multiplier of 4.57. Return on equity of 19.9% is therefore largely a product of leverage rather than of asset returns, and the ROIC figure gives the clearer picture of returns on capital.

Growth

Growth is green, held up by five-year revenue compound growth of 9.1% and five-year EPS growth of 65.3%. Over three years, revenue compounded at 2.9% and EPS at 8.6%, and over ten years revenue compounded at 5.0%. Revenue grew in six of the ten comparable years. Free cash flow per share has fallen, with a compound change of -27.2% over three years and -14.8% over five. Analysts expect next-year EPS to grow 7.6%, but that estimate was revised down by 1.1% over the last 90 days. Growth in earnings per share is high over five years, yet free cash flow per share is shrinking, so the earnings growth is not yet translating into cash for shareholders.

Valuation

Valuation is red, with the verdict overvalued and a margin of safety of -23.2%. The P/E of 26.6x is a 2.0% discount to its median of 27.1x, while EV/EBITDA of 14.8x carries a premium of 6.9% over its median of 13.8x. Price to sales of 6.6x is a premium of 89.6% over its median of 3.5x, and price to book of 5.3x is a premium of 59.9% over its median of 3.3x. The fair value band runs from 40.82 to 61.24 USD with a midpoint of 51.03 USD, and the fair value from historical multiples is also 51.03 USD. The DCF uses a discount rate of 8.87% and a terminal growth rate of 2.5%, but no per-share value is available, and the reverse DCF is not available. These values rest on fixed assumptions and are not a price target. The dividend yield is 3.1%, with a forward yield of 3.3%. Free cash flow is negative, so the dividend is not covered by free cash flow over the trailing twelve months.

Risks

The weakest numbers are net debt to EBITDA of 4.1x, the current ratio of 0.75, and the trailing free cash flow conversion of -53.8%. High leverage limits flexibility and makes the dividend and any refinancing more sensitive to earnings, and a weak current ratio means short-term obligations depend on continued access to funding. Negative free cash flow means the company is currently investing or distributing more than it generates, and an Altman Z-score of 1.18 signals that the balance sheet is under strain, although the estimated insolvency risk is low. The data does not include the company's debt maturity schedule, so the timing of refinancing needs cannot be assessed, and revenue by segment is not available, so the mix of earnings across pipelines, gathering and marketing cannot be seen. The reverse DCF and the DCF per-share value are not available, which limits the valuation cross-check to the multiples and the fair value band.