ONEOK shares fell by -2.6% during the day's morning session, and are now trading at a price of $93.36. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
an Increase in Expected Earnings Improves Its Value Outlook but Its Shares Are Expensive:
ONEOK, Inc. engages in gathering, processing, fractionation, storage, transportation, and marketing of natural gas and natural gas liquids (NGL) in the United States. The company belongs to the Utilities sector, which has an average price to earnings (P/E) ratio of 20.52 and an average price to book (P/B) ratio of 2.2. In contrast, ONEOK has a trailing 12 month P/E ratio of 19.8 and a P/B ratio of 3.23.
ONEOK's PEG ratio is 4.65, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Firm Has a Highly Leveraged Balance Sheet:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $12,593 | $10,164 | $8,542 | $16,540 | $22,387 | $17,677 |
| Operating Margins | 15% | 19% | 16% | 16% | 13% | 23% |
| Net Margins | 9% | 13% | 7% | 9% | 8% | 15% |
| Net Income (M) | $1,155 | $1,279 | $613 | $1,500 | $1,722 | $2,659 |
| Net Interest Expense (M) | $470 | $492 | $713 | $733 | $676 | $866 |
| Depreciation & Amort. (M) | $429 | $477 | $579 | $622 | $626 | $769 |
| Diluted Shares (M) | 414 | 415 | 432 | 447 | 448 | 485 |
| Earnings Per Share | $2.78 | $3.07 | $1.42 | $3.35 | $3.84 | $5.48 |
| EPS Growth | n/a | 10.43% | -53.75% | 135.92% | 14.63% | 42.71% |
| Avg. Price | $44.51 | $51.03 | $30.75 | $47.79 | $59.69 | $93.36 |
| P/E Ratio | 15.9 | 16.51 | 21.65 | 14.22 | 15.5 | 17.01 |
| Free Cash Flow (M) | $45 | -$1,902 | -$296 | $1,849 | $1,704 | $2,826 |
| CAPEX (M) | $2,141 | $3,848 | $2,195 | $697 | $1,202 | $1,595 |
| EV / EBITDA | 16.14 | 19.22 | 20.93 | 14.75 | 15.35 | 17.41 |
| Total Debt (M) | $18,273 | $24,980 | $28,428 | $26,348 | $26,296 | $42,883 |
| Net Debt / EBITDA | 8.07 | 10.44 | 14.38 | 8.14 | 7.6 | 8.79 |
| Current Ratio | 0.66 | 0.73 | 1.39 | 0.75 | 0.84 | 0.9 |
