Intrinsic value of ONEOK - OKE

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$50.90

  Intrinsic Value

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  Value-price divergence*

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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 10.9

 

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
 
  7,269
  9,752
  12,798
  16,461
  20,784
  25,799
  31,531
  37,994
  45,193
  53,126
  61,784
  71,155
  81,224
  91,974
  103,390
  115,456
  128,161
  141,494
  155,450
  170,026
  185,225
  201,052
  217,520
  234,642
  252,439
  270,932
  290,150
  310,125
  330,889
  352,483
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
  9,730
  12,275
  15,384
  19,111
  23,501
  28,583
  34,385
  40,919
  48,192
  56,199
  64,934
  74,384
  84,534
  95,367
  106,867
  119,020
  131,814
  145,239
  159,288
  173,960
  189,258
  205,185
  221,757
  238,985
  256,890
  275,495
  294,827
  314,919
  335,802
  357,519
Operating income, $m
  1,286
  2,528
  4,170
  6,198
  8,648
  11,548
  14,923
  18,787
  23,152
  28,019
  33,389
  39,254
  45,607
  52,437
  59,733
  67,483
  75,678
  84,309
  93,368
  102,853
  112,761
  123,095
  133,857
  145,056
  156,702
  168,808
  181,389
  194,465
  208,057
  222,189
  236,887
EBITDA, $m
  1,678
  2,734
  4,447
  6,561
  9,114
  12,137
  15,653
  19,681
  24,228
  29,300
  34,894
  41,005
  47,623
  54,738
  62,339
  70,412
  78,949
  87,940
  97,377
  107,257
  117,578
  128,342
  139,553
  151,218
  163,349
  175,959
  189,065
  202,685
  216,843
  231,564
  246,874
Interest expense (income), $m
  461
  322
  460
  696
  984
  1,331
  1,740
  2,215
  2,758
  3,370
  4,051
  4,803
  5,622
  6,510
  7,463
  8,481
  9,562
  10,704
  11,907
  13,170
  14,491
  15,872
  17,311
  18,809
  20,369
  21,990
  23,675
  25,426
  27,246
  29,137
  31,103
Earnings before tax, $m
  958
  2,206
  3,710
  5,503
  7,664
  10,217
  13,182
  16,572
  20,394
  24,650
  29,337
  34,452
  39,985
  45,928
  52,270
  59,002
  66,116
  73,604
  81,461
  89,683
  98,270
  107,223
  116,546
  126,247
  136,333
  146,818
  157,714
  169,039
  180,812
  193,052
  205,784
Tax expense, $m
  212
  596
  1,002
  1,486
  2,069
  2,759
  3,559
  4,474
  5,506
  6,655
  7,921
  9,302
  10,796
  12,400
  14,113
  15,931
  17,851
  19,873
  21,994
  24,214
  26,533
  28,950
  31,468
  34,087
  36,810
  39,641
  42,583
  45,641
  48,819
  52,124
  55,562
Net income, $m
  352
  1,610
  2,708
  4,017
  5,595
  7,459
  9,623
  12,098
  14,888
  17,994
  21,416
  25,150
  29,189
  33,527
  38,157
  43,072
  48,265
  53,731
  59,467
  65,469
  71,737
  78,273
  85,079
  92,160
  99,523
  107,177
  115,131
  123,399
  131,993
  140,928
  150,222

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
  1,030
  1,381
  1,813
  2,332
  2,944
  3,655
  4,467
  5,382
  6,402
  7,525
  8,752
  10,079
  11,506
  13,028
  14,645
  16,355
  18,154
  20,043
  22,020
  24,085
  26,238
  28,480
  30,812
  33,238
  35,759
  38,378
  41,101
  43,930
  46,871
  49,930
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
  1,610
  2,708
  4,017
  5,595
  7,459
  9,623
  12,098
  14,888
  17,994
  21,416
  25,150
  29,189
  33,527
  38,157
  43,072
  48,265
  53,731
  59,467
  65,469
  71,737
  78,273
  85,079
  92,160
  99,523
  107,177
  115,131
  123,399
  131,993
  140,928
  150,222
Depreciation, amort., depletion, $m
  392
  206
  276
  363
  466
  589
  731
  893
  1,076
  1,280
  1,505
  1,750
  2,016
  2,301
  2,606
  2,929
  3,271
  3,631
  4,009
  4,404
  4,817
  5,248
  5,696
  6,162
  6,648
  7,152
  7,676
  8,220
  8,786
  9,374
  9,986
Funds from operations, $m
  1,340
  1,816
  2,985
  4,380
  6,061
  8,047
  10,354
  12,991
  15,964
  19,275
  22,921
  26,900
  31,205
  35,828
  40,763
  46,001
  51,536
  57,362
  63,475
  69,873
  76,554
  83,520
  90,775
  98,322
  106,171
  114,329
  122,807
  131,619
  140,779
  150,302
  160,208
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
  2,123
  3,047
  4,457
  6,154
  8,157
  10,481
  13,136
  16,127
  19,457
  23,122
  27,119
  31,442
  36,083
  41,035
  46,290
  51,841
  57,683
  63,812
  70,226
  76,923
  83,905
  91,175
  98,739
  106,604
  114,779
  123,275
  132,105
  141,284
  150,828
  160,755
Maintenance CAPEX, $m
  0
  -150
  -206
  -276
  -363
  -466
  -589
  -731
  -893
  -1,076
  -1,280
  -1,505
  -1,750
  -2,016
  -2,301
  -2,606
  -2,929
  -3,271
  -3,631
  -4,009
  -4,404
  -4,817
  -5,248
  -5,696
  -6,162
  -6,648
  -7,152
  -7,676
  -8,220
  -8,786
  -9,374
New CAPEX, $m
  -625
  -281
  -352
  -432
  -519
  -612
  -710
  -812
  -915
  -1,020
  -1,124
  -1,226
  -1,327
  -1,426
  -1,523
  -1,617
  -1,709
  -1,800
  -1,889
  -1,977
  -2,065
  -2,153
  -2,242
  -2,333
  -2,425
  -2,521
  -2,620
  -2,722
  -2,829
  -2,941
  -3,059
Cash from investing activities, $m
  -615
  -431
  -558
  -708
  -882
  -1,078
  -1,299
  -1,543
  -1,808
  -2,096
  -2,404
  -2,731
  -3,077
  -3,442
  -3,824
  -4,223
  -4,638
  -5,071
  -5,520
  -5,986
  -6,469
  -6,970
  -7,490
  -8,029
  -8,587
  -9,169
  -9,772
  -10,398
  -11,049
  -11,727
  -12,433
Free cash flow, $m
  736
  1,692
  2,490
  3,749
  5,272
  7,078
  9,182
  11,593
  14,319
  17,361
  20,718
  24,388
  28,364
  32,641
  37,211
  42,067
  47,203
  52,613
  58,293
  64,240
  70,454
  76,935
  83,686
  90,710
  98,016
  105,610
  113,503
  121,707
  130,234
  139,100
  148,322
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
  5,655
  9,207
  11,992
  15,181
  18,772
  22,750
  27,101
  31,803
  36,836
  42,178
  47,811
  53,716
  59,881
  66,295
  72,951
  79,847
  86,983
  94,364
  101,995
  109,888
  118,053
  126,505
  135,261
  144,338
  153,756
  163,535
  173,699
  184,271
  195,277
  206,741
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
 
  3,659
  8,461
  11,076
  14,080
  17,472
  21,243
  25,378
  29,860
  34,672
  39,794
  45,208
  50,899
  56,854
  63,063
  69,519
  76,220
  83,164
  90,356
  97,800
  105,506
  113,484
  121,748
  130,311
  139,191
  148,406
  157,976
  167,922
  178,267
  189,035
  200,250
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
 
  3,227
  6,502
  7,326
  7,909
  8,216
  8,238
  7,987
  7,498
  6,822
  6,020
  5,153
  4,279
  3,446
  2,692
  2,038
  1,494
  1,061
  728
  483
  309
  191
  113
  65
  36
  19
  9
  5
  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 30.5
Price to Sales 1.2
Price to Book 56.7
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow 14.8
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 3.5% 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 8.4%.

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 213.215 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 $10.9 billion.


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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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