Intrinsic value of ONEOK - OKE

Previous Close

$50.61

  Intrinsic Value

$885.77

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

+1810%

Previous close

$50.61

 
Intrinsic value

$885.77

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

+1810%

*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 10.8

 

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
  55.00
  50.00
  45.50
  41.45
  37.81
  34.52
  31.57
  28.91
  26.52
  24.37
  22.43
  20.69
  19.12
  17.71
  16.44
  15.29
  14.27
  13.34
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
Revenue, $m
  0
  13,828
  20,741
  30,179
  42,688
  58,826
  79,135
  104,120
  134,226
  169,827
  211,215
  258,599
  312,105
  371,784
  437,624
  509,562
  587,498
  671,305
  760,848
  855,990
  956,605
  1,062,585
  1,173,848
  1,290,339
  1,412,037
  1,538,955
  1,671,144
  1,808,688
  1,951,710
  2,100,367
  2,254,850
Variable operating expenses, $m
 
  8,171
  12,230
  17,771
  25,115
  34,589
  46,513
  61,182
  78,857
  99,759
  124,058
  151,825
  183,238
  218,276
  256,931
  299,166
  344,922
  394,126
  446,696
  502,555
  561,626
  623,848
  689,171
  757,563
  829,012
  903,527
  981,135
  1,061,888
  1,145,856
  1,233,133
  1,323,831
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
  10,632
  14,753
  20,357
  27,765
  37,306
  49,297
  64,036
  81,782
  102,758
  127,131
  154,975
  186,467
  221,586
  260,324
  302,643
  348,486
  397,779
  450,441
  506,393
  565,560
  627,881
  693,304
  761,800
  833,355
  907,978
  985,698
  1,066,565
  1,150,650
  1,238,046
  1,328,867
Operating income, $m
  1,286
  3,196
  5,989
  9,822
  14,923
  21,520
  29,838
  40,084
  52,443
  67,070
  84,084
  103,624
  125,638
  150,198
  177,301
  206,919
  239,011
  273,526
  310,406
  349,596
  391,044
  434,705
  480,544
  528,539
  578,682
  630,978
  685,446
  742,124
  801,060
  862,320
  925,983
EBITDA, $m
  1,678
  3,323
  6,153
  10,038
  15,206
  21,890
  30,317
  40,699
  53,221
  68,039
  85,277
  105,021
  127,323
  152,206
  179,664
  209,671
  242,184
  277,151
  314,515
  354,219
  396,210
  440,443
  486,883
  535,507
  586,307
  639,288
  694,471
  751,891
  811,599
  873,662
  938,159
Interest expense (income), $m
  461
  472
  800
  1,362
  2,130
  3,148
  4,461
  6,114
  8,147
  10,597
  13,494
  16,862
  20,718
  25,072
  29,928
  35,286
  41,140
  47,482
  54,302
  61,588
  69,330
  77,518
  86,142
  95,196
  104,675
  114,578
  124,906
  135,663
  146,855
  158,494
  170,590
Earnings before tax, $m
  958
  2,724
  5,189
  8,460
  12,792
  18,372
  25,376
  33,970
  44,296
  56,473
  70,590
  86,762
  104,920
  125,126
  147,373
  171,633
  197,871
  226,044
  256,105
  288,008
  321,714
  357,187
  394,402
  433,344
  474,007
  516,399
  560,540
  606,461
  654,205
  703,826
  755,392
Tax expense, $m
  212
  735
  1,401
  2,284
  3,454
  4,960
  6,852
  9,172
  11,960
  15,248
  19,059
  23,426
  28,328
  33,784
  39,791
  46,341
  53,425
  61,032
  69,148
  77,762
  86,863
  96,441
  106,489
  117,003
  127,982
  139,428
  151,346
  163,744
  176,635
  190,033
  203,956
Net income, $m
  352
  1,988
  3,788
  6,176
  9,338
  13,411
  18,525
  24,798
  32,336
  41,225
  51,531
  63,336
  76,592
  91,342
  107,582
  125,292
  144,446
  165,012
  186,956
  210,246
  234,851
  260,747
  287,914
  316,341
  346,025
  376,972
  409,194
  442,717
  477,569
  513,793
  551,436

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
  25,005
  37,507
  54,573
  77,193
  106,376
  143,101
  188,281
  242,723
  307,101
  381,944
  467,630
  564,385
  672,303
  791,364
  921,451
  1,062,383
  1,213,933
  1,375,855
  1,547,901
  1,729,846
  1,921,493
  2,122,691
  2,333,344
  2,553,412
  2,782,921
  3,021,960
  3,270,684
  3,529,313
  3,798,131
  4,077,486
Adjusted assets (=assets-cash), $m
  15,890
  25,005
  37,507
  54,573
  77,193
  106,376
  143,101
  188,281
  242,723
  307,101
  381,944
  467,630
  564,385
  672,303
  791,364
  921,451
  1,062,383
  1,213,933
  1,375,855
  1,547,901
  1,729,846
  1,921,493
  2,122,691
  2,333,344
  2,553,412
  2,782,921
  3,021,960
  3,270,684
  3,529,313
  3,798,131
  4,077,486
Revenue / Adjusted assets
  0.000
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
Average production assets, $m
  486
  747
  1,120
  1,630
  2,305
  3,177
  4,273
  5,622
  7,248
  9,171
  11,406
  13,964
  16,854
  20,076
  23,632
  27,516
  31,725
  36,250
  41,086
  46,223
  51,657
  57,380
  63,388
  69,678
  76,250
  83,104
  90,242
  97,669
  105,392
  113,420
  121,762
Working capital, $m
  -1,407
  -207
  -311
  -453
  -640
  -882
  -1,187
  -1,562
  -2,013
  -2,547
  -3,168
  -3,879
  -4,682
  -5,577
  -6,564
  -7,643
  -8,812
  -10,070
  -11,413
  -12,840
  -14,349
  -15,939
  -17,608
  -19,355
  -21,181
  -23,084
  -25,067
  -27,130
  -29,276
  -31,505
  -33,823
Total debt, $m
  9,441
  15,995
  27,247
  42,606
  62,965
  89,229
  122,282
  162,944
  211,941
  269,882
  337,241
  414,358
  501,437
  598,564
  705,718
  822,797
  949,636
  1,086,031
  1,231,760
  1,386,602
  1,550,352
  1,722,834
  1,903,913
  2,093,500
  2,291,562
  2,498,120
  2,713,255
  2,937,106
  3,169,872
  3,411,809
  3,663,228
Total liabilities, $m
  15,950
  22,504
  33,756
  49,115
  69,474
  95,738
  128,791
  169,453
  218,450
  276,391
  343,750
  420,867
  507,946
  605,073
  712,227
  829,306
  956,145
  1,092,540
  1,238,269
  1,393,111
  1,556,861
  1,729,343
  1,910,422
  2,100,009
  2,298,071
  2,504,629
  2,719,764
  2,943,615
  3,176,381
  3,418,318
  3,669,737
Total equity, $m
  189
  2,500
  3,751
  5,457
  7,719
  10,638
  14,310
  18,828
  24,272
  30,710
  38,194
  46,763
  56,438
  67,230
  79,136
  92,145
  106,238
  121,393
  137,585
  154,790
  172,985
  192,149
  212,269
  233,334
  255,341
  278,292
  302,196
  327,068
  352,931
  379,813
  407,749
Total liabilities and equity, $m
  16,139
  25,004
  37,507
  54,572
  77,193
  106,376
  143,101
  188,281
  242,722
  307,101
  381,944
  467,630
  564,384
  672,303
  791,363
  921,451
  1,062,383
  1,213,933
  1,375,854
  1,547,901
  1,729,846
  1,921,492
  2,122,691
  2,333,343
  2,553,412
  2,782,921
  3,021,960
  3,270,683
  3,529,312
  3,798,131
  4,077,486
Debt-to-equity ratio
  49.952
  6.400
  7.260
  7.810
  8.160
  8.390
  8.550
  8.650
  8.730
  8.790
  8.830
  8.860
  8.880
  8.900
  8.920
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
  8.980
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
  1,988
  3,788
  6,176
  9,338
  13,411
  18,525
  24,798
  32,336
  41,225
  51,531
  63,336
  76,592
  91,342
  107,582
  125,292
  144,446
  165,012
  186,956
  210,246
  234,851
  260,747
  287,914
  316,341
  346,025
  376,972
  409,194
  442,717
  477,569
  513,793
  551,436
Depreciation, amort., depletion, $m
  392
  127
  165
  216
  283
  370
  480
  615
  777
  970
  1,193
  1,396
  1,685
  2,008
  2,363
  2,752
  3,172
  3,625
  4,109
  4,622
  5,166
  5,738
  6,339
  6,968
  7,625
  8,310
  9,024
  9,767
  10,539
  11,342
  12,176
Funds from operations, $m
  1,340
  2,116
  3,953
  6,391
  9,622
  13,782
  19,004
  25,413
  33,114
  42,195
  52,724
  64,733
  78,277
  93,350
  109,945
  128,044
  147,619
  168,637
  191,065
  214,869
  240,017
  266,485
  294,252
  323,309
  353,650
  385,282
  418,219
  452,483
  488,109
  525,135
  563,613
Change in working capital, $m
  -11
  -74
  -104
  -142
  -188
  -242
  -305
  -375
  -452
  -534
  -621
  -711
  -803
  -895
  -988
  -1,079
  -1,169
  -1,257
  -1,343
  -1,427
  -1,509
  -1,590
  -1,669
  -1,747
  -1,825
  -1,904
  -1,983
  -2,063
  -2,145
  -2,230
  -2,317
Cash from operations, $m
  1,351
  2,189
  4,056
  6,533
  9,809
  14,024
  19,309
  25,788
  33,565
  42,729
  53,345
  65,444
  79,079
  94,245
  110,933
  129,123
  148,788
  169,894
  192,408
  216,296
  241,526
  268,074
  295,921
  325,056
  355,476
  387,186
  420,201
  454,547
  490,254
  527,365
  565,930
Maintenance CAPEX, $m
  0
  -49
  -75
  -112
  -163
  -231
  -318
  -427
  -562
  -725
  -917
  -1,141
  -1,396
  -1,685
  -2,008
  -2,363
  -2,752
  -3,172
  -3,625
  -4,109
  -4,622
  -5,166
  -5,738
  -6,339
  -6,968
  -7,625
  -8,310
  -9,024
  -9,767
  -10,539
  -11,342
New CAPEX, $m
  -625
  -261
  -373
  -510
  -675
  -871
  -1,097
  -1,349
  -1,626
  -1,922
  -2,235
  -2,559
  -2,889
  -3,223
  -3,555
  -3,885
  -4,209
  -4,526
  -4,835
  -5,138
  -5,433
  -5,723
  -6,008
  -6,291
  -6,572
  -6,854
  -7,138
  -7,427
  -7,723
  -8,027
  -8,342
Cash from investing activities, $m
  -615
  -310
  -448
  -622
  -838
  -1,102
  -1,415
  -1,776
  -2,188
  -2,647
  -3,152
  -3,700
  -4,285
  -4,908
  -5,563
  -6,248
  -6,961
  -7,698
  -8,460
  -9,247
  -10,055
  -10,889
  -11,746
  -12,630
  -13,540
  -14,479
  -15,448
  -16,451
  -17,490
  -18,566
  -19,684
Free cash flow, $m
  736
  1,880
  3,608
  5,911
  8,971
  12,922
  17,895
  24,011
  31,377
  40,081
  50,193
  61,744
  74,794
  89,337
  105,370
  122,875
  141,828
  162,196
  183,948
  207,049
  231,471
  257,186
  284,175
  312,427
  341,936
  372,707
  404,753
  438,095
  472,764
  508,798
  546,246
Issuance/(repayment) of debt, $m
  456
  6,554
  11,252
  15,359
  20,358
  26,264
  33,053
  40,662
  48,997
  57,940
  67,359
  77,117
  87,080
  97,127
  107,154
  117,079
  126,839
  136,395
  145,729
  154,842
  163,750
  172,482
  181,079
  189,587
  198,062
  206,558
  215,135
  223,851
  232,766
  241,937
  251,419
Issuance/(repurchase) of shares, $m
  22
  323
  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
  6,877
  11,252
  15,359
  20,358
  26,264
  33,053
  40,662
  48,997
  57,940
  67,359
  77,117
  87,080
  97,127
  107,154
  117,079
  126,839
  136,395
  145,729
  154,842
  163,750
  172,482
  181,079
  189,587
  198,062
  206,558
  215,135
  223,851
  232,766
  241,937
  251,419
Total cash flow (excl. dividends), $m
  669
  8,757
  14,860
  21,270
  29,329
  39,186
  50,948
  64,673
  80,374
  98,022
  117,552
  138,861
  161,873
  186,464
  212,524
  239,954
  268,666
  298,591
  329,677
  361,892
  395,220
  429,668
  465,254
  502,014
  539,998
  579,265
  619,888
  661,946
  705,530
  750,735
  797,665
Retained Cash Flow (-), $m
  147
  -2,311
  -1,250
  -1,707
  -2,262
  -2,918
  -3,673
  -4,518
  -5,444
  -6,438
  -7,484
  -8,569
  -9,676
  -10,792
  -11,906
  -13,009
  -14,093
  -15,155
  -16,192
  -17,205
  -18,194
  -19,165
  -20,120
  -21,065
  -22,007
  -22,951
  -23,904
  -24,872
  -25,863
  -26,882
  -27,935
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
 
  6,446
  13,610
  19,564
  27,067
  36,268
  47,275
  60,155
  74,930
  91,584
  110,067
  130,292
  152,198
  175,672
  200,618
  226,945
  254,573
  283,436
  313,485
  344,687
  377,026
  410,503
  445,134
  480,949
  517,991
  556,314
  595,984
  637,074
  679,667
  723,853
  769,730
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
 
  5,684
  10,460
  12,940
  15,203
  17,055
  18,333
  18,932
  18,815
  18,021
  16,651
  14,850
  12,794
  10,648
  8,563
  6,652
  4,991
  3,615
  2,526
  1,702
  1,105
  690
  414
  239
  132
  70
  36
  17
  8
  3
  1
Current shareholders' claim on cash, %
  100
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4

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 30.3
Price to Sales 1.2
Price to Book 56.4
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow 14.7
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 55% 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 10 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 $10.8 billion.

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COMPANY NEWS

▶ What Does ONEOKs Leverage Indicate?   [Aug-17-17 09:06AM  Market Realist]
▶ ONEOK Offers Attractive Dividend Growth   [07:37AM  Market Realist]
▶ ONEOKs Earnings Growth across Its Businesses   [11:30AM  Market Realist]
▶ Is ONEOK Stock Currently Overvalued?   [09:06AM  Market Realist]
▶ Short Interest in ONEOK Has Fallen 9% since July 14   [Aug-14-17 05:06PM  Market Realist]
▶ ONEOK Is Down 10% Year-to-DateWhats Ahead?   [03:09PM  Market Realist]
▶ ONEOK: What Are Analysts Recommendations?   [Aug-03-17 07:38AM  Market Realist]
▶ ONEOK Expects Strong Volume Growth in 2017   [Aug-02-17 01:35PM  Market Realist]
▶ What Drove ONEOKs 2Q17 Earnings?   [12:05PM  Market Realist]
▶ Oneok misses 2Q profit forecasts   [Aug-01-17 09:49PM  Associated Press]
▶ Analysts Rating Upgrades for ONEOK   [Jul-27-17 07:41AM  Market Realist]
▶ ONEOK Announces 21 Percent Quarterly Dividend Increase   [Jul-26-17 04:15PM  PR Newswire]
▶ Will 2Q17 Results Boost ONEOK Stock?   [11:06AM  Market Realist]
▶ ONEOKs Dividend Growth in 2Q17 and Beyond   [07:45AM  Market Realist]
▶ ONEOKs 2Q17 Earnings Are Expected to Rise 14%   [07:45AM  Market Realist]
▶ 3 High-Yield Dividend Stocks for July   [Jul-24-17 04:30PM  Motley Fool]
▶ If You Like Dividends, You Should Love These 3 Stocks   [Jul-13-17 10:31AM  Motley Fool]
▶ ONEOK Announces $1.2 Billion Notes Offering   [Jul-10-17 04:15PM  PR Newswire]
▶ 3 Growth Dividend Stocks for July   [Jul-08-17 11:06AM  Motley Fool]
▶ ONEOK Was the S&P 500s Top Gainer on July 6   [Jul-07-17 09:52AM  Market Realist]
▶ The Hot Stock: Oneok Climbs 3.6%   [Jul-06-17 04:42PM  Barrons.com]
▶ ONEOK Announces Closing of Merger Transaction   [Jun-30-17 04:15PM  PR Newswire]
▶ A Look at Williams Partners Technical Indicators   [Jun-28-17 07:36AM  Market Realist]
▶ 2 Stocks With Better Dividends Than ConocoPhillips   [Jun-27-17 02:15PM  Motley Fool]
▶ Why ONEOK Inc Could Be a Gold Mine for Income Investors   [Jun-21-17 10:00AM  Motley Fool]
▶ ETFs with exposure to ONEOK, Inc. : June 20, 2017   [Jun-20-17 03:08PM  Capital Cube]
▶ ONEOK Redeems $87 Million in Outstanding Senior Notes   [Jun-12-17 04:15PM  PR Newswire]
▶ 3 Stocks to Buy With Dividends Yielding More Than 4%   [Jun-11-17 10:04AM  Motley Fool]
▶ Here's Why the Best Is Yet to Come for Enbridge Inc.   [Jun-06-17 10:00AM  Motley Fool]
▶ These 3 Hated Dividend Stocks Are Buys   [09:11AM  Motley Fool]
▶ 3 Top Oil Stocks for May   [May-09-17 06:13PM  Motley Fool]
▶ Narrowed Margins Hurt Targas Logistics and Marketing Segment   [May-05-17 05:22PM  Market Realist]
▶ Oil Stocks Plunge, Snap Looks Snappier; Time To Sell Apple? Or Hold Longer?   [May-04-17 12:45PM  Investor's Business Daily]
▶ Where ONEOK Expects to WinAnd What the Analysts Think   [May-03-17 05:35PM  Market Realist]
▶ Inside ONEOKs 1Q17 Earnings: Key Drivers   [04:06PM  Market Realist]
▶ Everything Clicked for ONEOK, Inc. in Q1   [09:35AM  Motley Fool]
▶ Oneok misses Street 1Q forecasts   [May-02-17 05:32PM  Associated Press]
▶ What Higher Short Interest in Oneok Indicates   [10:38AM  Market Realist]
▶ ONEOK down 6% Year-to-Date ahead of 1Q17 Earnings   [Apr-26-17 10:37AM  Market Realist]
▶ Likely Drivers of ONEOKs 1Q17 Earnings Growth   [01:05PM  Market Realist]
Stock chart of OKE Financial statements 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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