What the market is pricing
Wide range: intrinsic value is highly sensitive to assumptions — use the scenario analysis to anchor your view.
Valuation range
Red = below today's price. Green = above.
OGS fair value — three scenarios
At today's price of $86.00, start with the base case.
Downside — if growth disappoints
Use this if growth slows, margins stay weak, or investors demand more return.
Most likely outcome
Start here unless you have a strong reason to disagree with the base case.
Upside — if execution beats expectations
Use this if the company grows faster or earns more than the base case assumes.
DCF key assumptions
These three inputs drive most of the intrinsic value estimate. If your view of the business differs on any of them, adjust the scenario above — the fair value will shift accordingly.
Revenue growth forecast
Fades to 4.0% in years 6-10
The model sits close to reported 5Y CAGR.
Operating margin forecast
Current operating margin (TTM): 20.1%
The model assumes margins settle below the current level — a more conservative profitability assumption.
WACC (required return)
Terminal growth 2.0% | Spread 6.2 pts
The 6.2 pts gap between required return and long-run growth is reasonable, but the model will still react to rate changes.
All DCF inputs
High-impact inputs are the ones most likely to change the intrinsic value estimate if you disagree.
Revenue growth (years 1-5)
Average annual revenue growth assumed across the first five forecast years.
Revenue growth (years 6-10)
Growth gradually fades toward a long-run sustainable rate in the second forecast decade.
Operating margin (year 1 → year 10)
Profitability path used to convert revenue into free cash flow across the forecast period.
CapEx & reinvestment
How much of operating profit is spent on CapEx and working capital instead of being distributed as free cash flow.
WACC — weighted average cost of capital
Built from beta 0.73, risk-free rate, and equity risk premium plus a size premium. A higher WACC compresses intrinsic value quickly.
Terminal growth rate
Perpetual growth rate applied after year 10 — sets the size of the terminal value that drives most of the DCF.
Regulated free cash flows discounted at a utility WACC. Forecast source: analyst estimates. If your view of the business differs on any of these inputs, the bear and bull scenarios above show how the fair value shifts.
Revenue growth — history vs. model forecast
Past revenue growth
9.7%
5-year avg.
3-year avg. -2.0%
-2.1 pts
vs forecast
DCF base-case forecast
7.5%
Avg years 1–5
Tapering to 4.0% in years 6–10
The model assumes 7.5% over Years 1-5 versus a reported 5-year avg. of 9.7%.
Profitability today (TTM)
20.1%
Operating margin TTM
-9.4%
FCF margin TTM
DCF model type
Analyst estimates
FCFF (Utility)
Cash flow measure: Operating margin
ONE Gas, Inc.'s DCF is more grounded in near-term cash flows than most — the first decade carries an above-average share of intrinsic value.
In the base case, 42% of intrinsic value comes from the 10-year forecast and 58% from the terminal value. The higher the terminal value share, the more the fair value depends on long-run growth assumptions rather than near-term execution.
Base-case value split
42%
Years 1-10
58%
After Year 10
Dark = Years 1-10. Amber = after Year 10.
Cash flow path
$156.9M → $250.9M
Year 1 to Year 10 base case
The base case asks for a meaningful ramp in free cash flow over the decade.
Use it to frame what must go right or wrong — not as a point estimate. The scenario cards above are more useful than the base-case number at this confidence level.
How the score is calculated
Model limitations
Limited data coverage
-2 ptsSome inputs could not be fully verified from available sources, so the estimate carries a wider margin of uncertainty.
Model strengths
Sufficient operating history
✓ PassAt least five years of annual history feed the model, so the forecast is not starting from a thin base.
Analyst-backed revenue forecast
✓ PassRevenue and margin assumptions are based on analyst estimates, not just historical trends.
Near-term cash flows carry meaningful weight
✓ PassLess than 60% of the estimated value comes from beyond Year 10, so the near-term forecast carries real weight.
DCF sensitivity analysis
Small changes in WACC or terminal growth can shift the intrinsic value estimate significantly. This table tests whether ONE Gas, Inc. still looks undervalued, fairly priced, or overvalued when those assumptions are adjusted up or down.
WACC × terminal growth
Each cell tests a different WACC and terminal growth combination. Top-left is the harshest. Bottom-right is the most forgiving.
| Terminal growth rate — lower is more conservative ← → higher is more optimistic | |||||
| WACC↑ higher = lower value↓ lower = higher value | 1.0% | 1.5% | 2.0%Base | 2.5% | 3.0% |
|---|---|---|---|---|---|
| 10.2% | -75%$21.69 | -74%$22.78 | -72%$24.00 | -70%$25.38 | -69%$26.95 |
| 9.2% | -69%$26.66 | -67%$28.16 | -65%$29.87 | -63%$31.84 | -60%$34.12 |
| 8.2%Base | -62%$33.04 | -59%$35.18 | Base-56%$37.66 | -53%$40.57 | -49%$44.05 |
| 7.2% | -52%$41.51 | -48%$44.68 | -44%$48.47 | -38%$53.06 | -32%$58.75 |
| 6.2% | -38%$53.29 | -32%$58.28 | -25%$64.48 | -16%$72.36 | -4%$82.72 |
What to do with this
Most tested scenarios still show ONE Gas, Inc. trading above intrinsic value. To change this reading you would need to believe WACC should be materially lower or long-run growth materially higher than the base case — the scenario cards above let you test both directly.
Reverse DCF — what today's price implies
Reverse DCF keeps the cash-flow forecast fixed — including about 7.5% average revenue growth in Years 1–5 — then asks: what required return or long-run growth rate would make today's price rational?
Price vs. DCF fair value
above DCF fair value
What today's price is asking you to believe
Both required return and long-run growth need to be more favorable than the base case.
The stock trades 136% above the DCF fair-value estimate — the other side of the 58% premium shown in the verdict above (both measure the same gap, just from different reference points). The market is effectively assuming a lower required return, a higher long-run growth rate, or both.
Current price
$86.00Market price used in the reverse DCFDCF fair value
$37.66Base-case intrinsic value per shareForecast growth (Years 1-5)
7.5% avg. per yearAverage annual revenue growth in the DCF base caseWhat long-run growth does today's price imply?
vs. DCF base case
Holding the required return fixed, this price only works if long-run growth is 5.8% — above the 2.0% rate in the base case. That pushes long-run growth into a range investors should treat cautiously for a mature US business.
DCF base case terminal growth: 2.0%What WACC does today's price imply?
vs. DCF base case
This price only works if investors accept a 5.2% required return — below the 8.2% used in the base case.
DCF base case WACC: 8.2%Same DCF model applied to every company. If OGS's gap to fair value stands apart from peers, the case is stock-specific — not a sector-wide trend.
| Company | Peer Type | Mkt Cap | Price | Intrinsic Value | Upside / Premium | Status |
|---|---|---|---|---|---|---|
| OGSONE Gas, Inc.You are here | Subject | — | $86.00 | $37.66 | -58% | Overvalued |
| Core | $5.1B | $86.21 | — | — | — | |
| Core | $5.5B | $54.86 | — | — | — | |
| Core | $6.6B | $90.82 | $23.58 | -75% | Overvalued | |
| Core | $2.0B | $48.66 | — | — | — | |
| Core | $238M | $23.01 | — | — | — | |
| Segment | $30.5B | $184.52 | — | — | — | |
| Segment | $7.7B | $81.51 | — | — | — |
Differences in intrinsic value reflect differences in each company's financial data and business model — not inconsistency in the methodology. Peer rows without DCF coverage show “—”.
This page is for informational purposes only and does not constitute financial advice. Intrinsic value estimates are model outputs under stated assumptions and should not be relied upon as the sole basis for any investment decision.
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