A Look at ONEOK's Valuation Following Eiger Express Pipeline Expansion Decision

If you have been tracking ONEOK (OKE), you probably took notice this week when the company and its partners committed to constructing the Eiger Express Pipeline. This is not just another infrastructure announcement; it signals a major move in expanding natural gas transportation from the Permian Basin to key Gulf Coast markets. With firm long-term transportation agreements already in place, ONEOK appears to be focusing on high-demand energy corridors, a strategy that could influence its growth story for years to come.

This announcement comes during a year that has been anything but smooth for ONEOK’s stock. Over the past year, shares have dropped around 12%, and they are sitting lower for the year to date, reflecting cautious sentiment even as the broader sector shifts toward growth investments. Yet, when viewed over a longer term, ONEOK's return profile appears stronger, showing nearly 50% gains over three years and almost tripling over the last five. This pipeline project now joins recent efforts to build up natural gas infrastructure, aiming to restore some momentum and reassure investors about the company’s long-range outlook.

After such a mixed year in the market, is ONEOK now trading at a steep discount, or is the market already pricing in all this future growth?

Most Popular Narrative: 22% Undervalued

According to the community narrative, ONEOK is seen as significantly undervalued based on a blend of future earnings, margins, and revenue growth assumptions. Analysts anticipate strong performance driven by the company's expanding infrastructure and strategic foothold in key export markets.

Persistent growth in global demand for U.S. natural gas and NGLs, driven by increasing international energy needs and continued coal-to-gas switching, supports long-term volume throughput and higher utilization rates across ONEOK's midstream and export infrastructure. This directly underpins future revenue and EBITDA growth.

What underpins this bullish outlook? There is a big story about where profits, margins, and valuation are expected to go. The narrative teases a sharp divergence from today's numbers and banks on global energy shifts. Want to uncover which key financial forecasts push ONEOK's fair value so far above its current share price? You'll need to look closer to see exactly what this consensus is betting on and why those who agree say this stock is set for a powerful rerating.

Result: Fair Value of $97.83 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts. However, earnings remain vulnerable to commodity price swings and integration risks from recent acquisitions. These factors could limit upside if industry conditions worsen. Find out about the key risks to this ONEOK narrative.

Another View: Putting the DCF Model to the Test

Taking a different approach, the SWS DCF model also suggests a significant gap between today's share price and its estimate of ONEOK's worth. However, is this cash-flow-based optimism justified, or does it overlook key risks?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out ONEOK for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own ONEOK Narrative

Keep in mind, if you have your own perspective or want to dig into the numbers yourself, you can assemble your own narrative in just a few minutes with Do it your way.

A great starting point for your ONEOK research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

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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.

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