Here's Why ONEOK (NYSE:OKE) Has Caught The Eye Of Investors

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in ONEOK (NYSE:OKE). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for ONEOK

How Quickly Is ONEOK Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, ONEOK has achieved impressive annual EPS growth of 42%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Unfortunately, ONEOK's revenue dropped 23% last year, but the silver lining is that EBIT margins improved from 12% to 22%. That's not a good look.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for ONEOK.

Are ONEOK Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news is that ONEOK insiders spent a whopping US$1.8m on stock in just one year, without so much as a single sale. Knowing this, ONEOK will have have all eyes on them in anticipation for the what could happen in the near future. It is also worth noting that it was President Pierce Norton who made the biggest single purchase, worth US$1.5m, paying US$60.96 per share.

On top of the insider buying, it's good to see that ONEOK insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$202m. While that is a lot of skin in the game, we note this holding only totals to 0.5% of the business, which is a result of the company being so large. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because on our analysis the CEO, Pierce Norton, is paid less than the median for similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like ONEOK, with market caps over US$8.0b, is about US$12m.

ONEOK's CEO took home a total compensation package worth US$8.1m in the year leading up to December 2022. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does ONEOK Deserve A Spot On Your Watchlist?

ONEOK's earnings per share growth have been climbing higher at an appreciable rate. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest ONEOK belongs near the top of your watchlist. We should say that we've discovered 2 warning signs for ONEOK (1 shouldn't be ignored!) that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of ONEOK, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.