• Wondering if ONEOK at around US$87.50 is offering value right now or asking too much for its shares? This article walks through what the current price might actually imply.
• The stock has posted a 4.8% gain over the last 7 days, while the past month shows a 6.9% decline. Returns of 17.7% year to date and 7.0% over the last year give more context to how the market has been responding.
• Recent coverage has focused on ONEOK's position in the energy sector and how investor sentiment around income producing infrastructure assets has shifted. This helps frame these mixed short term returns. News around capital allocation decisions and balance sheet priorities has also played into how investors are assessing risk and potential resilience.
• ONEOK currently has a valuation score of 4/6. This suggests that several checks point to the stock being priced below some assessment benchmarks. Next, the article walks through those valuation methods before finishing with a broader way to think about what that score really means for you.

Approach 1: ONEOK Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes projected future cash flows, then discounts them back to today to estimate what the business might be worth right now. For ONEOK, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections.

ONEOK's latest reported free cash flow is about $2.48b. Analyst and extrapolated projections point to free cash flow of roughly $5.07b by 2030, with a series of annual estimates in between. Simply Wall St notes that analyst inputs typically cover up to five years, and the later years in this ten year path are extrapolated rather than directly forecast by analysts.

After discounting these projected cash flows back to today, the model arrives at an estimated intrinsic value of about $189.86 per share. Compared with the current share price around $87.50, this output implies the shares are trading at roughly a 53.9% discount to that DCF estimate. On this model alone, that reading indicates the stock is undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests ONEOK is undervalued by 53.9%. Track this in your watchlist or portfolio, or discover 54 more high quality undervalued stocks.

Approach 2: ONEOK Price vs Earnings

For a profitable company like ONEOK, the P/E ratio is a useful way to gauge how much you are paying for each dollar of current earnings. Investors usually accept a higher or lower P/E depending on what they expect for future earnings growth and how much risk they see in those earnings.

ONEOK currently trades on a P/E of about 16.25x. That sits above the Oil and Gas industry average of roughly 14.85x, while the peer group average is higher at about 19.17x. To go a step further, Simply Wall St calculates a proprietary “Fair Ratio” of 24.78x for ONEOK. This represents the P/E level that might be reasonable given factors such as its earnings growth profile, profit margins, industry, market cap and risk characteristics.

This Fair Ratio can be more informative than a simple comparison with industry or peer averages because it is tailored to the company’s own fundamentals rather than broad groupings. With the current P/E of 16.25x sitting well below the Fair Ratio of 24.78x, the shares appear undervalued on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your ONEOK Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives are a simple way for you to attach a clear story about ONEOK to concrete numbers such as your assumed fair value, future revenue, earnings and margin estimates, then link that story to a Fair Value that you can compare with the current price to help you decide whether to act or wait.

On Simply Wall St's Community page, Narratives are available as an easy tool used by millions of investors. They are updated automatically when fresh information arrives, such as new earnings, guidance, analyst targets or news, so your Fair Value view and key assumptions stay aligned with what is happening.

For ONEOK, one Narrative might look a lot like the more optimistic view with a Fair Value of about US$110.77 that is built on assumptions such as revenue growth of around 13.26% and a future P/E near 19.38x. Another reflects a more cautious stance with Fair Value around US$74.00 based on revenue that is modeled to decline by roughly 3.49% and a future P/E near 15.21x. Your job as an investor is to choose which story feels closer to how you see the company and its risks.

For ONEOK however we will make it really easy for you with previews of two leading ONEOK Narratives:

Start by using these as bookends, then decide which story feels closer to how you see the business, its risks, and what you are willing to pay for the stock at around US$87.50.

Fair Value: about US$110.77

Implied discount vs last close: roughly 21.0% below this fair value based on the bullish narrative

Revenue growth assumption: about 13.26% a year

• Assumes ONEOK keeps benefiting from large scale midstream infrastructure and recent asset integrations, supporting higher throughput and segment margins over time.
• Builds in rising free cash flow that could support balance sheet repair plus room for dividends and buybacks, using updated analyst targets around US$110.77 as an anchor.
• Recognises meaningful risks around energy transition, regional concentration, leverage, and ESG pressures, but treats them as manageable within a constructive long term earnings path.

Fair Value: about US$74.00

Implied stretch vs last close: roughly 18.3% above this fair value based on the bearish narrative

Revenue growth assumption: about 3.49% decline a year

• Assumes slower revenue over time as hydrocarbon demand faces pressure from regulation and renewables, with midstream assets at risk of weaker long term utilisation.
• Highlights the drag from ongoing capital spending, debt and interest costs, and questions how much earnings support there is if spreads stay tight and volumes do not ramp.
• Treats limited diversification beyond hydrocarbons as a key issue, with fair value set closer to US$74.00 to reflect a more cautious stance on future earnings and multiples.

The gap between these two narratives gives you a clear valuation range, from roughly US$74.00 on the cautious side to about US$110.77 on the optimistic side, around the current market price. Your next step is to decide which assumptions about revenue, margins and long term energy demand you are more comfortable backing for ONEOK, and how that fits with your risk tolerance and income or growth goals.

Do you think there's more to the story for ONEOK? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.