Phillips 66 (PSX)

Corporate Profile

Basic information about Phillips 66

Financial Statements

Income Statement

The income statement (statement of earnings) reports on the performance of Phillips 66, the result of its operating activities.

Statement of Comprehensive Income

Comprehensive income is the change in equity (net assets) of Phillips 66 during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Balance Sheet: Assets

The assets reports major classes and amounts of resources owned or controlled by Phillips 66.

Balance Sheet: Liabilities and Stockholders’ Equity

The liabilities and stockholders’ equity reports major classes and amounts of external claims on assets and owners’ capital contributions, and other internally generated sources of capital.

Cash Flow Statement

The cash flow statement provides information about Phillips 66’s cash receipts and cash payments during an accounting period, showing how these cash flaws link the ending cash balance to the beginning balance shown on Phillips 66’s balance sheet.

Common-Size Financial Statements

Common-Size Income Statement

Income statement components (revenues and expenses) shown as percentage of total sales.

Common-Size Balance Sheet: Assets

Assets components shown as percentage of total assets.

Common-Size Balance Sheet: Liabilities and Stockholders’ Equity

Liabilities and stockholders’ equity components shown as percentage of total liabilities and stockholders’ equity.

Analysis of Financial Ratios

Analysis of Short-term (Operating) Activity Ratios

Evaluates revenues and output generated by the Phillips 66’s assets. Operating performance ratios describe the relationship between the Phillips 66’s level of operations and the assets needed to sustain operating activities.

Analysis of Long-term (Investment) Activity Ratios

Measures how efficiently Phillips 66 generates revenues from its investments in fixed or total assets.

Analysis of Liquidity Ratios

Measures the adequacy of Phillips 66’s cash resources to meet its near-term cash obligations.

Analysis of Solvency Ratios

Examines Phillips 66’s capital structure in terms of the mix of its financing sources and the ability of the firm to satisfy its longer-term debt and investment obligations.

Relative Valuation

Common Stock Valuation Ratios

Relative valuation technique determine the value of Phillips 66 by comparing it to similar entities (like industry or sector) on the basis of several relative ratios that compare its stock price to relevant variables that affect the stock’s value, such as earnings, book value, and sales.

Enterprise Value (EV)

Enterprise value is total company value (the market value of common equity, debt, and preferred equity) minus the value of cash and short-term investments.

Enterprise Value to EBITDA (EV/EBITDA)

To calculate EBITDA analysts start with net earnings. To that earnings number, interest, taxes, depreciation, and amortization are added. EBITDA as a pre-interest number is a flow to all providers of capital.

Enterprise Value to FCFF (EV/FCFF)

Free cash flow to the firm is the cash flow available to the Phillips 66’s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.

Price to FCFE (P/FCFE)

Free cash flow to equity is the cash flow available to Phillips 66’s equity holders after all operating expenses, interest, and principal payments have been paid and necessary investments in working and fixed capital have been made.

Discounted Cash Flow (DCF) Valuation

Capital Asset Pricing Model (CAPM)

CAPM is a theory concentrated with deriving the expected rates of return on risky assets based on the assets’ systematic risk levels. Systematic risk is the variability of returns that is due to macroeconomic factors that affect all risky assets. It cannot be eliminated by diversification.

Dividend Discount Model (DDM)

The Dividend Discount Model (DDM) is a technique for estimating the value of a share of Phillips 66’s common stock issue as the present value of all future dividends.

Present Value of Free Cash Flow to the Firm (FCFF)

The FCFF valuation approach estimates the value of the firm as the present value of future FCFF discounted at the weighted average cost of capital (WACC).

Present Value of Free Cash Flow to Equity (FCFE)

The FCFE valuation approach estimates the value of equity as the present value of future FCFE discounted at the required rate of return on equity.

Current Ratio
since 2012

Phillips 66’s liquidity ratio calculated as current assets divided by current liabilities.

Debt to Equity
since 2012

Phillips 66’s solvency ratio calculated as total debt divided by total shareholders’ equity.

Net Profit Margin
since 2012

Phillips 66’s indicator of profitability, calculated as net income divided by revenue.

Return on Equity (ROE)
since 2012

Phillips 66’s profitability ratio calculated as net income divided by shareholders’ equity.

Price to Earnings (P/E)
since 2012

The P/E ratio tells analyst how much an investor in Phillips 66’s common stock pays per dollar of current earnings.

Price to Sales (P/S)
since 2012

An rationale for the P/S ratio is that sales, as the top line in an income statement, are generally less subject to distortion or manipulation than other fundamentals such as EPS or book value. Sales are also more stable than earnings and never negative.

Price to Book Value (P/BV)
since 2012

The P/BV ratio is interpreted as an indicator of market judgment about the relationship between a company’s required rate of return and its actual rate of return.


Financial Reporting Quality

Analysis of Bad Debts

The accounts receivable that are estimated to be uncollectible are called bad debts or doubtful accounts receivable.

Aggregate Accruals

Financial reporting quality relates to the accuracy with which Phillips 66’s reported financial statements reflect its operating performance and to their usefulness for forecasting future cash flows.
Aggregate accruals deriving measures of the accrual component of Phillips 66’s earnings.