Is the Market Overlooking ONEOK Stock’s Next Move?

We think ONEOK (OKE) stock could be a good value buy. It is currently trading lower than average valuation, and has reasonable revenue growth and strong margins to go with its modest valuation.

Buying stocks with low valuations or trading well below their peaks but maintaining strong margins allows investors to capture mean reversion and valuation re-rating potential. The downside risk is potentially less because high-margin businesses can sustain earnings and recover faster when sentiment or market conditions improve

What Is Happening With OKE

OKE may be down -23% so far this year but is now 30% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago, and also trades at a P/E (Price-to-Earnings) ratio that is below S&P 500 median.

The stock may not reflect it yet, but here is what’s going well for the company. Recent acquisitions like EnLink and Medallion are boosting margins, with $250 million in incremental synergies expected in 2025. Increasing natural gas liquids and natural gas processing volumes, particularly from the Rocky Mountain and Permian regions, coupled with over 90% fee-based revenue in key segments, supports strong operational performance. Future revenue growth is tied to completed projects, including pipeline expansions and a new Texas City LPG export joint venture. However, the valuation remains discounted due to near-term Bakken headwinds, perceptions regarding the acquisition’s quality mix, and broader energy market sentiment. Management reaffirmed 2025 guidance, and the stock trades around $73.10, significantly below its $113.63 52-week high.

OKE Has Strong Fundamentals

• Reasonable Revenue Growth: 58.4% LTM and 16.4% last 3 year average.
• Strong Margin: Nearly 21.2% 3-year average operating margin.
• No Major Margin Shock: ONEOK has avoided any large large margin collapse in the last 12 months.
• Modest Valuation: Despite encouraging fundamentals, OKE stock trades at a PE multiple of 13.8

Below is a quick comparison of OKE fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While OKE stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. OKE fell 42% in the Dot-Com Bubble, 65% during the Global Financial Crisis, and took a 29% hit in the 2018 Correction. The Covid Pandemic was even worse, hitting a steep 80% drop, while the Inflation Shock knocked it down nearly 30%. So even with solid fundamentals, OKE isn’t immune when the market turns sour. Risk stays real when panic sets in. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read OKE Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

For more details and our view, see Buy or Sell OKE Stock.

Stocks Like OKE

Not ready to act on OKE? Consider these alternatives:

1. Accenture (ACN)
2. Adobe (ADBE)
3. PayPal (PYPL)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Meaningfully below 1Y high
3. Current P/S < last few year average
4. Strong operating margin
5. P/E ratio below S&P 500 median

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 12.7% and 25.8% respectively
• Win rate (percentage of picks returning positive) of > 70% for both 6-month and 12-month periods
• Strategy consistent across market cycles

Portfolios Beat Stock Picking

Stocks soar and sink – the key is staying invested. A balanced portfolio keeps you in the market, boosts gains and reduces single stock risk

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.