What ONEOK’s Current Valuation Indicates



Premium relative to peers

Currently, ONEOK (OKE) stock is trading at a forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] ratio of 13.4x. This is higher than 12.2x for Targa Resources (TRGP) and 10.7x for Kinder Morgan (KMI).

OKE’s metric is close to the forward EV-to-EBITDA ratio of 13.3x for Enterprise Products Partners (EPD). So, OKE seems to be trading at a premium compared to its peers.

The chart above compares the forward EV-to-EBITDA multiples for OKE, EPD, TRGP, and KMI. As the chart shows, OKE stock is trading at a multiple higher than its five-year average of 12.6x.

OKE is trading at a slight premium compared to its own historical valuation as well. ONEOK stock is down 10% so far in 2017.

OKE’s yield

ONEOK is trading at a dividend yield of ~5.6%, which is higher than ~2.8% for Kinder Morgan and ~5.2% for Magellan Midstream Partners (MMP). However, it’s lower compared to ~6.4% for Enterprise Products Partners.

The Alerian MLP Index currently trades at a yield of ~7.9%. The broader markets (SPY) yield nearly 2.0%. The energy sector forms ~6.0% of the S&P 500 Index (SPX-INDEX).

To learn about some of the top-yielding MLPs, please read These 10 MLPs Offer the Highest Yields. In the final part of this series, we’ll take a look at what Wall Street analysts recommend for ONEOK.

More From Market Realist