Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
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Phillips 66 pages available for free this week:
- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- Analysis of Reportable Segments
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2012
- Current Ratio since 2012
- Price to Earnings (P/E) since 2012
- Price to Sales (P/S) since 2012
- Aggregate Accruals
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Return on Invested Capital (ROIC)
Phillips 66, ROIC calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
| Occidental Petroleum Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2019 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The analysis of financial data over the five-year period reveals several important trends related to profitability, capital investment, and efficiency in the use of invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT shows a consistent upward trend from 2015 through 2019, increasing from 3,281 million US dollars to 5,344 million US dollars. This represents a significant improvement in operating profitability, indicating that the company has been able to enhance its earnings from core operations over this time span.
- Invested Capital
- Invested capital has generally increased year over year, rising from 42,469 million US dollars in 2015 to 50,827 million US dollars in 2019. There was a slight decrease in 2018 compared to 2017, moving from 49,009 to 48,544 million, but the overall trajectory remains upward. This growth suggests ongoing capital investment in operational assets and possibly expansion initiatives.
- Return on Invested Capital (ROIC)
- ROIC improved markedly between 2015 and 2016, climbing from 7.73% to 9.69%, and remained relatively stable thereafter, with values hovering between approximately 9.5% and 10.6% through 2019. The peak ROIC was achieved in 2018 at 10.57%, slightly decreasing to 10.51% in 2019. This stability at a higher level indicates enhanced efficiency in generating returns on the invested capital base compared to the starting period.
In summary, the company exhibited steady growth in net operating profits alongside increasing invested capital, while successfully improving and maintaining a higher return on invested capital. This combination of trends points to effective capital management and profitability improvement over the five-year period analyzed.
Decomposition of ROIC
Phillips 66, decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2019 | = | × | × | ||||
| Dec 31, 2018 | = | × | × | ||||
| Dec 31, 2017 | = | × | × | ||||
| Dec 31, 2016 | = | × | × | ||||
| Dec 31, 2015 | = | × | × |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The analysis of the financial ratios over the five-year period reveals several notable trends and fluctuations.
- Operating Profit Margin (OPM)
- The operating profit margin shows a general upward trend from 4.74% in 2015 to a peak of 5.88% in 2018, followed by a slight decline to 5.65% in 2019. This suggests an overall improvement in operational efficiency and profitability, with a minor decrease in the final year observed.
- Turnover of Capital (TO)
- The turnover of capital ratio exhibits variability, starting at 2.33 in 2015, decreasing significantly to 1.82 in 2016, and then showing a recovery to 2.3 in 2018 before declining again to 2.11 in 2019. This indicates some fluctuations in asset efficiency in generating revenue, reflecting potential changes in asset management or sales performance over the period.
- Effective Cash Tax Rate (1 – CTR)
- The effective cash tax rate, expressed here as 1 minus the tax rate, fluctuates considerably, with a notably high value of 98.47% in 2016 and a low of 69.99% in 2015. The following years show variability with values mostly in the range of 78.21% to 92.78%. These changes suggest variability in tax obligations or tax planning effectiveness during the period under review.
- Return on Invested Capital (ROIC)
- The return on invested capital demonstrates a consistent upward trend from 7.73% in 2015 to 10.57% in 2018, maintaining a similar level (10.51%) in 2019. This indicates an improvement in the company’s ability to generate returns from its investments, reflecting stronger capital utilization and profitability over time.
In summary, the data suggests improvements in profitability and return on invested capital, alongside fluctuations in capital turnover and tax efficiency. The overall picture points to enhanced operational and investment effectiveness, despite some variation in asset turnover and tax metrics.
Operating Profit Margin (OPM)
Phillips 66, OPM calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Sales and other operating revenues | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
| Occidental Petroleum Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2019 Calculation
OPM = 100 × NOPBT ÷ Sales and other operating revenues
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net operating profit before taxes (NOPBT)
- The net operating profit before taxes experienced a fluctuating trend over the five-year period. Starting at 4,688 million USD in 2015, it slightly declined to 4,549 million USD in 2016, followed by an increase to 5,026 million USD in 2017. A significant rise was observed in 2018 reaching 6,558 million USD, before a moderate decrease to 6,060 million USD in 2019. Overall, the NOPBT showed growth with some variability.
- Sales and other operating revenues
- Sales and other operating revenues demonstrated a generally upward trend from 2015 to 2019. Beginning at 98,975 million USD in 2015, there was a drop to 84,279 million USD in 2016. However, revenues recovered and increased steadily to 102,354 million USD in 2017, peaking at 111,461 million USD in 2018, before a slight decline to 107,293 million USD in 2019. The growth over the period suggests positive business expansion with a temporary setback in 2016.
- Operating profit margin (OPM)
- The operating profit margin showed an overall improvement throughout the period. Starting at 4.74% in 2015, it rose to 5.4% in 2016, then slightly declined to 4.91% in 2017. The margin increased again to its highest point of 5.88% in 2018 and decreased marginally to 5.65% in 2019. This indicates increasing operational efficiency with modest fluctuations.
Turnover of Capital (TO)
Phillips 66, TO calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Sales and other operating revenues | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
| Occidental Petroleum Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Invested capital. See details »
2 2019 Calculation
TO = Sales and other operating revenues ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
- Sales and other operating revenues
- The sales and other operating revenues exhibited fluctuations over the analyzed periods. Starting at 98,975 million US dollars at the end of 2015, revenues declined significantly in 2016 to 84,279 million, reflecting a downturn. However, there was a strong recovery in 2017 and 2018, reaching 102,354 million and 111,461 million respectively. In 2019, revenues slightly declined to 107,293 million, indicating some volatility but generally maintaining a higher level than the 2016 trough.
- Invested capital
- Invested capital showed a consistent upward trend from 2015 through 2019. Beginning at 42,469 million US dollars in 2015, there was a steady increase year over year, reaching 50,827 million by the end of 2019. The growth is relatively moderate but uninterrupted, suggesting ongoing capital investment.
- Turnover of capital (TO)
- The turnover of capital ratio experienced notable variation throughout the periods. The ratio decreased considerably from 2.33 in 2015 to 1.82 in 2016, paralleling the revenue decrease and indicating lower efficiency in using invested capital. Subsequently, the ratio improved to 2.09 in 2017 and further to 2.30 in 2018, suggesting enhanced utilization and operational efficiency. In 2019, the ratio undershot slightly to 2.11, implying a marginal decline in capital turnover efficiency but still remaining above the 2016 level.
- Summary
- Overall, the data reveals a period marked by an initial decline in revenues and capital turnover efficiency in 2016. This was followed by a recovery phase during 2017 and 2018, highlighted by increased revenues and improved capital turnover. The invested capital steadily expanded across all years, signaling continuous investment in assets. Despite a slight revenue and turnover ratio dip in 2019, operations maintained a relatively stable performance compared to the initial downturn. The fluctuations in capital turnover align with the revenue trends, pointing to a direct relationship between asset utilization efficiency and sales performance.
Effective Cash Tax Rate (CTR)
Phillips 66, CTR calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
| Occidental Petroleum Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2019 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
Over the five-year period, the cash operating taxes exhibited significant fluctuations without a consistent upward or downward trend. The value started at 1,407 million US dollars in 2015, dropped sharply to 70 million in 2016, then increased to 363 million in 2017, peaked again at 1,429 million in 2018, and finally decreased to 716 million in 2019. This irregular pattern suggests volatility in tax cash payments, which may be influenced by changes in profitability, tax regulations, or one-time tax events.
Net operating profit before taxes (NOPBT) demonstrated a generally positive trend. It began at 4,688 million US dollars in 2015, experienced a slight decline to 4,549 million in 2016, and then consistently increased to reach 6,558 million in 2018. Although there was a minor decline to 6,060 million in 2019, the overall trend over the period was growth in operating profit before taxes, indicating improving operating performance.
The effective cash tax rate (CTR) showed considerable variability during these years. Starting relatively high at 30.01% in 2015, it sharply dropped to very low levels in the subsequent years—1.53% in 2016 and 7.22% in 2017—before rising again to 21.79% in 2018 and decreasing to 11.82% in 2019. This erratic pattern may reflect variations in tax planning strategies, deferred taxes, credits, or adjustments in tax liabilities impacting the cash tax payments relative to operating profits.
- Summary of trends
- Cash operating taxes fluctuated markedly without a clear directional trend, indicating volatility in cash tax outflows.
- Net operating profit before taxes generally increased over the period, showing improved operational profitability despite a small dip in the final year.
- The effective cash tax rate was highly variable, suggesting inconsistent tax expense recognition or tax planning tactics that significantly impacted cash taxes paid.