Intrinsic value of ONEOK - OKE

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$52.23

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$52.23

 
Intrinsic value

$427.02

 
Up/down potential

+718%

 
Rating

str. buy

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of OKE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 11.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  14.92
  37.40
  34.16
  31.24
  28.62
  26.26
  24.13
  22.22
  20.50
  18.95
  17.55
  16.30
  15.17
  14.15
  13.24
  12.41
  11.67
  11.00
  10.40
  9.86
  9.38
  8.94
  8.55
  8.19
  7.87
  7.58
  7.33
  7.09
  6.88
  6.70
  6.53
Revenue, $m
  0
  12,257
  16,445
  21,583
  27,759
  35,048
  43,506
  53,173
  64,071
  76,211
  89,588
  104,188
  119,991
  136,971
  155,100
  174,351
  194,699
  216,123
  238,607
  262,141
  286,722
  312,352
  339,043
  366,813
  395,687
  425,697
  456,884
  489,292
  522,976
  557,992
  594,407
Variable operating expenses, $m
 
  7,249
  9,707
  12,724
  16,350
  20,630
  25,595
  31,270
  37,669
  44,796
  52,650
  61,169
  70,447
  80,416
  91,060
  102,362
  114,308
  126,887
  140,087
  153,904
  168,335
  183,383
  199,053
  215,357
  232,309
  249,929
  268,238
  287,265
  307,041
  327,599
  348,979
Fixed operating expenses, $m
 
  2,461
  2,523
  2,586
  2,650
  2,717
  2,784
  2,854
  2,925
  2,999
  3,073
  3,150
  3,229
  3,310
  3,393
  3,477
  3,564
  3,653
  3,745
  3,838
  3,934
  4,033
  4,133
  4,237
  4,343
  4,451
  4,563
  4,677
  4,794
  4,913
  5,036
Total operating expenses, $m
  7,635
  9,710
  12,230
  15,310
  19,000
  23,347
  28,379
  34,124
  40,594
  47,795
  55,723
  64,319
  73,676
  83,726
  94,453
  105,839
  117,872
  130,540
  143,832
  157,742
  172,269
  187,416
  203,186
  219,594
  236,652
  254,380
  272,801
  291,942
  311,835
  332,512
  354,015
Operating income, $m
  1,286
  2,547
  4,215
  6,273
  8,759
  11,702
  15,127
  19,048
  23,477
  28,416
  33,864
  39,869
  46,315
  53,245
  60,647
  68,511
  76,826
  85,583
  94,775
  104,399
  114,452
  124,936
  135,856
  147,219
  159,035
  171,318
  184,083
  197,350
  211,141
  225,479
  240,392
EBITDA, $m
  1,678
  2,732
  4,445
  6,559
  9,111
  12,133
  15,649
  19,675
  24,221
  29,292
  34,885
  40,994
  47,611
  54,724
  62,323
  70,394
  78,929
  87,917
  97,352
  107,230
  117,549
  128,310
  139,518
  151,180
  163,308
  175,915
  189,017
  202,635
  216,789
  231,506
  246,812
Interest expense (income), $m
  461
  460
  658
  994
  1,406
  1,901
  2,486
  3,164
  3,940
  4,814
  5,788
  6,861
  8,032
  9,299
  10,661
  12,116
  13,660
  15,292
  17,011
  18,814
  20,702
  22,674
  24,730
  26,871
  29,098
  31,414
  33,821
  36,323
  38,923
  41,624
  44,433
Earnings before tax, $m
  958
  2,088
  3,557
  5,280
  7,353
  9,801
  12,641
  15,884
  19,537
  23,602
  28,077
  33,008
  38,283
  43,945
  49,986
  56,396
  63,166
  70,291
  77,765
  85,585
  93,750
  102,263
  111,127
  120,348
  129,937
  139,903
  150,262
  161,027
  172,218
  183,855
  195,959
Tax expense, $m
  212
  564
  960
  1,425
  1,985
  2,646
  3,413
  4,289
  5,275
  6,373
  7,581
  8,912
  10,336
  11,865
  13,496
  15,227
  17,055
  18,979
  20,996
  23,108
  25,313
  27,611
  30,004
  32,494
  35,083
  37,774
  40,571
  43,477
  46,499
  49,641
  52,909
Net income, $m
  352
  1,524
  2,597
  3,854
  5,368
  7,155
  9,228
  11,595
  14,262
  17,230
  20,496
  24,096
  27,946
  32,080
  36,490
  41,169
  46,111
  51,312
  56,768
  62,477
  68,438
  74,652
  81,122
  87,854
  94,854
  102,129
  109,691
  117,550
  125,719
  134,214
  143,050

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  249
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  16,139
  21,849
  29,313
  38,472
  49,482
  62,475
  77,551
  94,782
  114,209
  135,849
  159,693
  185,719
  213,888
  244,154
  276,470
  310,785
  347,057
  385,246
  425,325
  467,275
  511,090
  556,777
  604,355
  653,855
  705,324
  758,819
  814,410
  872,179
  932,220
  994,639
  1,059,549
Adjusted assets (=assets-cash), $m
  15,890
  21,849
  29,313
  38,472
  49,482
  62,475
  77,551
  94,782
  114,209
  135,849
  159,693
  185,719
  213,888
  244,154
  276,470
  310,785
  347,057
  385,246
  425,325
  467,275
  511,090
  556,777
  604,355
  653,855
  705,324
  758,819
  814,410
  872,179
  932,220
  994,639
  1,059,549
Revenue / Adjusted assets
  0.000
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
Average production assets, $m
  486
  662
  888
  1,165
  1,499
  1,893
  2,349
  2,871
  3,460
  4,115
  4,838
  5,626
  6,480
  7,396
  8,375
  9,415
  10,514
  11,671
  12,885
  14,156
  15,483
  16,867
  18,308
  19,808
  21,367
  22,988
  24,672
  26,422
  28,241
  30,132
  32,098
Working capital, $m
  -1,407
  -184
  -247
  -324
  -416
  -526
  -653
  -798
  -961
  -1,143
  -1,344
  -1,563
  -1,800
  -2,055
  -2,326
  -2,615
  -2,920
  -3,242
  -3,579
  -3,932
  -4,301
  -4,685
  -5,086
  -5,502
  -5,935
  -6,385
  -6,853
  -7,339
  -7,845
  -8,370
  -8,916
Total debt, $m
  9,441
  13,155
  19,873
  28,115
  38,025
  49,718
  63,287
  78,795
  96,279
  115,755
  137,215
  160,638
  185,990
  213,230
  242,314
  273,198
  305,842
  340,213
  376,283
  414,038
  453,472
  494,590
  537,410
  581,961
  628,283
  676,428
  726,460
  778,452
  832,489
  888,666
  947,085
Total liabilities, $m
  15,950
  19,664
  26,382
  34,624
  44,534
  56,227
  69,796
  85,304
  102,788
  122,264
  143,724
  167,147
  192,499
  219,739
  248,823
  279,707
  312,351
  346,722
  382,792
  420,547
  459,981
  501,099
  543,919
  588,470
  634,792
  682,937
  732,969
  784,961
  838,998
  895,175
  953,594
Total equity, $m
  189
  2,185
  2,931
  3,847
  4,948
  6,247
  7,755
  9,478
  11,421
  13,585
  15,969
  18,572
  21,389
  24,415
  27,647
  31,079
  34,706
  38,525
  42,532
  46,727
  51,109
  55,678
  60,435
  65,386
  70,532
  75,882
  81,441
  87,218
  93,222
  99,464
  105,955
Total liabilities and equity, $m
  16,139
  21,849
  29,313
  38,471
  49,482
  62,474
  77,551
  94,782
  114,209
  135,849
  159,693
  185,719
  213,888
  244,154
  276,470
  310,786
  347,057
  385,247
  425,324
  467,274
  511,090
  556,777
  604,354
  653,856
  705,324
  758,819
  814,410
  872,179
  932,220
  994,639
  1,059,549
Debt-to-equity ratio
  49.952
  6.020
  6.780
  7.310
  7.680
  7.960
  8.160
  8.310
  8.430
  8.520
  8.590
  8.650
  8.700
  8.730
  8.760
  8.790
  8.810
  8.830
  8.850
  8.860
  8.870
  8.880
  8.890
  8.900
  8.910
  8.910
  8.920
  8.930
  8.930
  8.930
  8.940
Adjusted equity ratio
  0.012
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  352
  1,524
  2,597
  3,854
  5,368
  7,155
  9,228
  11,595
  14,262
  17,230
  20,496
  24,096
  27,946
  32,080
  36,490
  41,169
  46,111
  51,312
  56,768
  62,477
  68,438
  74,652
  81,122
  87,854
  94,854
  102,129
  109,691
  117,550
  125,719
  134,214
  143,050
Depreciation, amort., depletion, $m
  392
  185
  230
  286
  352
  431
  522
  627
  745
  876
  1,020
  1,125
  1,296
  1,479
  1,675
  1,883
  2,103
  2,334
  2,577
  2,831
  3,097
  3,373
  3,662
  3,962
  4,273
  4,598
  4,934
  5,284
  5,648
  6,026
  6,420
Funds from operations, $m
  1,340
  1,709
  2,827
  4,140
  5,720
  7,586
  9,750
  12,222
  15,007
  18,105
  21,516
  25,221
  29,242
  33,559
  38,165
  43,052
  48,214
  53,646
  59,345
  65,308
  71,534
  78,025
  84,784
  91,816
  99,127
  106,727
  114,625
  122,834
  131,368
  140,240
  149,470
Change in working capital, $m
  -11
  -50
  -63
  -77
  -93
  -109
  -127
  -145
  -163
  -182
  -201
  -219
  -237
  -255
  -272
  -289
  -305
  -321
  -337
  -353
  -369
  -384
  -400
  -417
  -433
  -450
  -468
  -486
  -505
  -525
  -546
Cash from operations, $m
  1,351
  1,753
  2,890
  4,217
  5,813
  7,695
  9,877
  12,367
  15,170
  18,287
  21,717
  25,440
  29,479
  33,814
  38,437
  43,341
  48,519
  53,968
  59,682
  65,661
  71,903
  78,410
  85,184
  92,232
  99,560
  107,177
  115,093
  123,320
  131,873
  140,766
  150,016
Maintenance CAPEX, $m
  0
  -97
  -132
  -178
  -233
  -300
  -379
  -470
  -574
  -692
  -823
  -968
  -1,125
  -1,296
  -1,479
  -1,675
  -1,883
  -2,103
  -2,334
  -2,577
  -2,831
  -3,097
  -3,373
  -3,662
  -3,962
  -4,273
  -4,598
  -4,934
  -5,284
  -5,648
  -6,026
New CAPEX, $m
  -625
  -176
  -226
  -277
  -334
  -394
  -457
  -522
  -589
  -656
  -722
  -788
  -853
  -917
  -979
  -1,040
  -1,099
  -1,157
  -1,214
  -1,271
  -1,327
  -1,384
  -1,441
  -1,500
  -1,559
  -1,621
  -1,684
  -1,750
  -1,819
  -1,891
  -1,966
Cash from investing activities, $m
  -615
  -273
  -358
  -455
  -567
  -694
  -836
  -992
  -1,163
  -1,348
  -1,545
  -1,756
  -1,978
  -2,213
  -2,458
  -2,715
  -2,982
  -3,260
  -3,548
  -3,848
  -4,158
  -4,481
  -4,814
  -5,162
  -5,521
  -5,894
  -6,282
  -6,684
  -7,103
  -7,539
  -7,992
Free cash flow, $m
  736
  1,480
  2,531
  3,762
  5,246
  7,002
  9,042
  11,375
  14,007
  16,940
  20,171
  23,684
  27,501
  31,601
  35,979
  40,626
  45,538
  50,708
  56,134
  61,813
  67,744
  73,929
  80,370
  87,071
  94,040
  101,283
  108,812
  116,636
  124,770
  133,227
  142,023
Issuance/(repayment) of debt, $m
  456
  3,963
  6,717
  8,243
  9,909
  11,694
  13,569
  15,508
  17,485
  19,475
  21,460
  23,423
  25,352
  27,240
  29,084
  30,884
  32,644
  34,370
  36,071
  37,755
  39,434
  41,118
  42,820
  44,551
  46,322
  48,145
  50,032
  51,992
  54,037
  56,176
  58,420
Issuance/(repurchase) of shares, $m
  22
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -67
  3,963
  6,717
  8,243
  9,909
  11,694
  13,569
  15,508
  17,485
  19,475
  21,460
  23,423
  25,352
  27,240
  29,084
  30,884
  32,644
  34,370
  36,071
  37,755
  39,434
  41,118
  42,820
  44,551
  46,322
  48,145
  50,032
  51,992
  54,037
  56,176
  58,420
Total cash flow (excl. dividends), $m
  669
  5,443
  9,248
  12,004
  15,156
  18,695
  22,610
  26,883
  31,492
  36,415
  41,632
  47,107
  52,853
  58,841
  65,062
  71,510
  78,182
  85,079
  92,205
  99,568
  107,178
  115,047
  123,189
  131,622
  140,362
  149,429
  158,843
  168,628
  178,807
  189,403
  200,443
Retained Cash Flow (-), $m
  147
  -1,996
  -746
  -916
  -1,101
  -1,299
  -1,508
  -1,723
  -1,943
  -2,164
  -2,384
  -2,603
  -2,817
  -3,027
  -3,232
  -3,432
  -3,627
  -3,819
  -4,008
  -4,195
  -4,382
  -4,569
  -4,758
  -4,950
  -5,147
  -5,349
  -5,559
  -5,777
  -6,004
  -6,242
  -6,491
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,447
  8,502
  11,089
  14,055
  17,396
  21,103
  25,160
  29,549
  34,251
  39,247
  44,504
  50,036
  55,815
  61,831
  68,078
  74,555
  81,260
  88,197
  95,373
  102,797
  110,478
  118,432
  126,672
  135,215
  144,079
  153,284
  162,851
  172,803
  183,161
  193,952
Discount rate, %
 
  13.40
  14.07
  14.77
  15.51
  16.29
  17.10
  17.96
  18.86
  19.80
  20.79
  21.83
  22.92
  24.06
  25.27
  26.53
  27.86
  29.25
  30.71
  32.25
  33.86
  35.55
  37.33
  39.20
  41.16
  43.22
  45.38
  47.65
  50.03
  52.53
  55.16
PV of cash for distribution, $m
 
  3,040
  6,534
  7,334
  7,894
  8,180
  8,184
  7,918
  7,420
  6,740
  5,937
  5,072
  4,206
  3,383
  2,639
  1,995
  1,462
  1,036
  711
  471
  301
  186
  110
  63
  35
  18
  9
  4
  2
  1
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

ONEOK, Inc., through its general partner interests in ONEOK Partners, L.P., engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates through the Natural Gas Gathering and Processing, the Natural Gas Liquids, and the Natural Gas Pipelines segments. The company gathers, treats, fractionates, stores, and transports natural gas liquids (NGL), as well as owns natural gas liquids gathering and distribution pipelines, natural gas liquids distribution and refined petroleum products pipelines, and terminal and storage facilities; and operates interstate and intrastate regulated natural gas transmission pipelines and natural gas storage facilities, as well as stores, markets, and distributes NGL products to petrochemical manufacturers, heating fuel users, ethanol producers, refineries, exporters, and propane distributors. It also owns and operates a parking garage in downtown Tulsa, Oklahoma; and leases excess office space to others. ONEOK, Inc. was founded in 1906 and is headquartered in Tulsa, Oklahoma.

FINANCIAL RATIOS  of  ONEOK (OKE)

Valuation Ratios
P/E Ratio 31.3
Price to Sales 1.2
Price to Book 58.2
Price to Tangible Book
Price to Cash Flow 8.1
Price to Free Cash Flow 15.2
Growth Rates
Sales Growth Rate 14.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -47.4%
Cap. Spend. - 3 Yr. Gr. Rate -22.6%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 4190.5%
Total Debt to Equity 4995.2%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 3.7%
Ret/ On T. Cap. - 3 Yr. Avg. 3.2%
Return On Equity 134.1%
Return On Equity - 3 Yr. Avg. 69.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 20.3%
EBITDA Margin - 3 Yr. Avg. 16.1%
Operating Margin 14.4%
Oper. Margin - 3 Yr. Avg. 11.4%
Pre-Tax Margin 10.7%
Pre-Tax Margin - 3 Yr. Avg. 8.1%
Net Profit Margin 3.9%
Net Profit Margin - 3 Yr. Avg. 3.2%
Effective Tax Rate 22.1%
Eff/ Tax Rate - 3 Yr. Avg. 22.3%
Payout Ratio 147.2%

OKE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OKE stock intrinsic value calculation we used $8921 million for the last fiscal year's total revenue generated by ONEOK. The default revenue input number comes from 2016 income statement of ONEOK. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our OKE stock valuation model: a) initial revenue growth rate of 37.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 13.4%, whose default value for OKE is calculated based on our internal credit rating of ONEOK, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of ONEOK.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of OKE stock the variable cost ratio is equal to 59.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2401 million in the base year in the intrinsic value calculation for OKE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5% for ONEOK.

Corporate tax rate of 27% is the nominal tax rate for ONEOK. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the OKE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for OKE are equal to 5.4%.

Life of production assets of 2.6 years is the average useful life of capital assets used in ONEOK operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for OKE is equal to -1.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $189 million for ONEOK - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 212.843 million for ONEOK is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of ONEOK at the current share price and the inputted number of shares is $11.1 billion.


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▶ ONEOK and ONEOK Partners Announce Organizational Changes   [Mar-07-17 04:15PM  PR Newswire]
▶ [$$] Corporate Urge to Merge Roars On   [02:15AM  at Barrons.com]
Stock chart of OKE Financial statements of OKE Annual reports of OKE
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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