Phillips 66 (NYSE:PSX)

The financial data reveals fluctuating performance metrics over the five-year period, highlighting variations in profitability and leverage.

Return on Assets (ROA)

The ROA experienced significant variability, starting at 8.7% in 2015, declining sharply to 3.01% in 2016, then increasing to a peak of 10.3% in 2018 before decreasing again to 5.24% in 2019. This trend indicates an inconsistent efficiency in generating profits from assets, with a notable dip in 2016 and a recovery period following it.

Financial Leverage

The financial leverage ratio showed a generally increasing trend across the period. Beginning at 2.1 in 2015, it rose steadily to 2.36 by 2019, with slight fluctuations in between. This suggests a gradual increase in reliance on debt financing relative to equity, which may have implications for the company’s risk profile and cost of capital.

Return on Equity (ROE)

The ROE mirrored the ROA's volatility but with much larger proportional changes, indicating sensitivity to leverage and profitability shifts. It declined from 18.3% in 2015 to 6.95% in 2016, then sharply increased to a peak of 22.7% in 2018, followed by a decline to 12.35% in 2019. The fluctuations suggest changes in the company's ability to generate returns for shareholders, influenced by both operational performance and financial leverage.

Overall, the data reflects cyclical profitability with increasing leverage, implying that the company may be managing growth or investment strategies that affect both returns and risk levels. The volatility in profitability measures suggests external or internal factors impacting operational efficiency and equity returns over time.

The analyzed financial data reveals notable fluctuations and trends across the key performance indicators over the five-year period ending in 2019.

Net Profit Margin

The net profit margin exhibited variability throughout the timeline. The margin started at 4.27% in 2015, dropped substantially to 1.85% in 2016, before rebounding to a peak of 5.02% in 2018. However, in 2019, the margin declined again to 2.87%. This pattern indicates volatility in profitability, with a high point in 2018 suggesting effective cost management or revenue growth in that year that was not sustained in the following year.

Asset Turnover

This ratio, indicative of operational efficiency, showed moderate fluctuations. Starting at 2.04 in 2015, it decreased to 1.63 in 2016, then improved steadily to reach 2.05 in 2018, before a slight decrease to 1.83 in 2019. Despite the dip in 2016, the trend towards generally high asset turnover ratios suggests consistent asset utilization effectiveness, with a minor decline in the last year.

Financial Leverage

Financial leverage ratios incrementally increased over the period, from 2.1 in 2015 to 2.36 in 2019, with slight fluctuations in intervening years. This gradual rise signifies an increasing reliance on debt relative to equity in the company’s capital structure, potentially amplifying both returns and financial risk.

Return on Equity (ROE)

ROE exhibited considerable volatility. Beginning at 18.3% in 2015, it dropped sharply to 6.95% in 2016, before climbing to 22.7% in 2018, the highest point in the period. By 2019, ROE declined to 12.35%. The fluctuations in ROE mirror those in net profit margin, signifying changes in profitability significantly impacted shareholder returns. The peak in 2018 aligns with high profitability and efficient asset use, whereas the decline in 2019 suggests deteriorating profitability or increased financial risk, as indicated by the rising leverage.

Overall, the data depicts a company experiencing cyclical profitability and efficiency levels, with a tendency towards increased financial leverage over the analyzed period. While operational metrics such as asset turnover have largely remained robust, profitability and equity returns have suffered from significant fluctuations, indicating potential vulnerability to external market conditions or operational challenges in certain years.

The analyzed financial data demonstrates several notable trends over the five-year period.

Tax Burden

The tax burden ratio exhibited variability, starting at 0.71 in 2015, increasing markedly to 1.5 in 2017, and then stabilizing around 0.78 to 0.79 in the subsequent years. The spike in 2017 suggests an unusual tax effect for that year which normalized afterward.

Interest Burden

This ratio shows a decline from 0.95 in 2015 to a low of 0.86 in 2016, followed by slight recovery and fluctuations between 0.89 and 0.93 through 2019. Overall, interest burden remained relatively stable with modest decreases indicating some fluctuation in the impact of interest expenses.

EBIT Margin

The EBIT margin experienced a downward trend from 6.37% in 2015 to a low of 2.9% in 2016, followed by recovery to 6.88% in 2018 before declining again to 4.04% in 2019. This pattern indicates variability in operating profitability, with a peak in 2018.

Asset Turnover

Asset turnover diminished from 2.04 in 2015 to 1.63 in 2016, recovered to 2.05 in 2018, then declined again slightly to 1.83 by 2019. The fluctuations suggest varying efficiency in asset utilization over the years, with peak efficiency noted in 2018.

Financial Leverage

Financial leverage steadily increased over the period, from 2.1 in 2015 to 2.36 in 2019. This upward trend indicates a growing reliance on debt or other liabilities to finance equity.

Return on Equity (ROE)

ROE started high at 18.3% in 2015, dropped sharply to 6.95% in 2016, rebounded strongly to peak at 22.7% in 2018, and then dropped again to 12.35% in 2019. This variability reflects volatility in overall profitability for shareholders, influenced by fluctuations in operational efficiency, leverage, and burden ratios.

Overall, the data reveals considerable fluctuations in profitability and efficiency measures. Operational margins and asset utilization showed cyclical patterns with peaks around 2018. The tax burden demonstrated an outlier increase in 2017. Financial leverage increased steadily, potentially contributing to the changes in ROE, which showed considerable volatility over the period. These trends suggest a dynamic financial environment with variations in both internal operations and external financial structure.

Net Profit Margin

The net profit margin experienced fluctuations over the observed period. It started at 4.27% in 2015, then decreased significantly to 1.85% in 2016. In 2017 and 2018, it improved, reaching 4.99% and 5.02% respectively, indicating enhanced profitability during these years. However, in 2019, the margin declined again to 2.87%, suggesting a reduction in profit generation efficiency relative to sales.

Asset Turnover

Asset turnover ratio showed a downward trend initially, dropping from 2.04 in 2015 to 1.63 in 2016. It recovered in 2017 and 2018 with values of 1.88 and 2.05 respectively, indicating better utilization of assets to generate sales during this period. Nevertheless, in 2019, the ratio decreased to 1.83, reflecting a slight reduction in asset productivity.

Return on Assets (ROA)

ROA followed a similar pattern to the net profit margin. It started at 8.7% in 2015 and sharply declined to 3.01% in 2016. A strong recovery occurred in the subsequent two years, with ROA reaching 9.39% in 2017 and peaking at 10.3% in 2018, indicating effective asset utilization and profitability. In 2019, ROA decreased to 5.24%, representing a notable drop in the efficiency of asset-generated returns.

Overall Insights

The financial performance over the five-year period displayed volatility, with 2016 marked as a low point across profitability and asset efficiency metrics. The years 2017 and 2018 showed marked improvements in profitability and asset use, pointing to operational enhancements or favorable market conditions. The decline in 2019 across all metrics suggests challenges impacting both profit margins and asset efficiency, warranting further investigation into underlying causes.

Tax Burden

The tax burden ratio fluctuated notably over the period, starting at 0.71 in 2015, seeing a significant increase to 1.5 in 2017, before stabilizing around 0.78-0.79 in 2018 and 2019. The spike in 2017 indicates an unusual tax impact that year compared to other years.

Interest Burden

Interest burden exhibited a generally declining trend, starting at 0.95 in 2015 and decreasing to 0.89 by 2019, with minor fluctuations in between. This suggests a slight reduction in interest expenses relative to earnings before interest and taxes, potentially indicating improved interest cost management or debt structure.

EBIT Margin

The EBIT margin showed variability, declining sharply from 6.37% in 2015 to a low of 2.9% in 2016, then recovering to 6.88% in 2018 before decreasing again to 4.04% in 2019. This pattern points to fluctuating operational profitability during the reviewed period.

Asset Turnover

Asset turnover decreased from 2.04 in 2015 to 1.63 in 2016, rebounded to 2.05 in 2018, and then declined to 1.83 in 2019. These movements indicate changes in the efficiency with which assets generate revenues, with the highest efficiency noted in 2018.

Return on Assets (ROA)

The ROA reflected considerable volatility, initially falling sharply from 8.7% in 2015 to 3.01% in 2016, then rising to a peak of 10.3% in 2018, and dropping again to 5.24% in 2019. This pattern highlights fluctuations in overall profitability relative to total assets during the timeframe.

The financial ratios exhibit varying trends over the five-year period under review.

Tax Burden

The tax burden ratio fluctuated, beginning at 0.71 in 2015 and increasing to a peak of 1.5 in 2017 before declining and stabilizing around 0.78-0.79 in 2018 and 2019. The spike in 2017 suggests an unusual change in tax-related expenses or adjustments for that year, followed by normalization in subsequent years.

Interest Burden

The interest burden ratio declined from 0.95 in 2015 to 0.86 in 2016, then showed minor fluctuations around 0.89 to 0.93 until 2019. This indicates relatively consistent interest expense management, with a slight initial decrease and modest variability thereafter.

EBIT Margin

EBIT margin showed variability but an overall downward trend from 6.37% in 2015 to 4.04% in 2019, with the lowest point recorded in 2016 at 2.9% and a recovery to 6.88% in 2018. This reflects fluctuations in operating profitability with a significant rebound in 2018 before decreasing again in 2019.

Net Profit Margin

Net profit margin mirrored the EBIT margin trend closely, declining sharply from 4.27% in 2015 to 1.85% in 2016, rising to nearly 5% in 2017 and 2018, and then falling again to 2.87% in 2019. This pattern indicates variability in overall profitability influenced by both operating performance and other factors such as tax and interest expenses.

In summary, the data reveals fluctuating profitability measures with notable peaks and troughs, particularly in tax burden and profit margins. The stable interest burden ratio suggests modest changes in financing costs, whereas the tax burden experienced significant variation impacting net results. The operating and net profit margins highlight challenges in maintaining consistent profitability during this period.