Enterprise Value to EBITDA (EV/EBITDA)
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
Phillips 66, EBITDA calculation
US$ in millions
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).
The financial performance of Phillips 66 between 2015 and 2019 is characterized by significant volatility across all primary earnings metrics. A cyclical pattern is evident, with a substantial contraction in 2016, a recovery phase through 2018, and a subsequent decline in 2019.
- EBITDA Trend Analysis
- Earnings before interest, tax, depreciation and amortization (EBITDA) experienced a sharp decline from US$ 7,432 million in 2015 to a period low of US$ 3,697 million in 2016. This was followed by a strong upward trajectory, peaking at US$ 9,305 million in 2018, representing a growth of approximately 152% from the 2016 trough. However, this momentum reversed in 2019, with EBITDA falling to US$ 5,977 million.
- Depreciation and Amortization Impact
- The variance between EBITDA and EBIT reveals a consistent trend in depreciation and amortization expenses. These non-cash charges remained relatively stable, ranging from approximately US$ 1,078 million in 2015 to US$ 1,341 million in 2019. The steady nature of these expenses suggests a consistent capital asset base despite the volatility in operational earnings.
- Earnings Conversion and Net Income Correlation
- Net income exhibits a strong positive correlation with EBITDA, following the same cyclical peaks and troughs. The most pronounced divergence is observed in 2018, where EBITDA reached its zenith of US$ 9,305 million, resulting in the highest net income of the period at US$ 5,595 million. By 2019, the contraction in EBITDA to US$ 5,977 million coincided with a nearly 45% reduction in net income attributable to the company, falling to US$ 3,076 million.
- Operating Profitability Stability
- The relationship between EBIT and Earnings before tax (EBT) indicates that interest expenses remained a consistent factor in the financial structure. The margins between these two figures stayed narrow throughout the five-year period, suggesting that fluctuations in bottom-line profitability were driven more by operational EBITDA volatility than by changes in financing costs.
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Enterprise Value to EBITDA Ratio, Current
Phillips 66, current EV/EBITDA calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 51,629) |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 5,977) |
| Valuation Ratio | |
| EV/EBITDA | 8.64 |
| Benchmarks | |
| EV/EBITDA, Competitors1 | |
| Chevron Corp. | 10.81 |
| ConocoPhillips | 6.77 |
| Exxon Mobil Corp. | 10.32 |
Based on: 10-K (reporting date: 2019-12-31).
1 Click competitor name to see calculations.
If the company EV/EBITDA is lower then the EV/EBITDA of benchmark then company is relatively undervalued.
Otherwise, if the company EV/EBITDA is higher then the EV/EBITDA of benchmark then company is relatively overvalued.
Enterprise Value to EBITDA Ratio, Historical
Phillips 66, historical EV/EBITDA 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) | ||||||
| Enterprise value (EV)1 | 51,629) | 54,931) | 55,363) | 49,493) | 48,895) | |
| Earnings before interest, tax, depreciation and amortization (EBITDA)2 | 5,977) | 9,305) | 5,311) | 3,697) | 7,432) | |
| Valuation Ratio | ||||||
| EV/EBITDA3 | 8.64 | 5.90 | 10.42 | 13.39 | 6.58 | |
| Benchmarks | ||||||
| EV/EBITDA, Competitors4 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil 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).
3 2019 Calculation
EV/EBITDA = EV ÷ EBITDA
= 51,629 ÷ 5,977 = 8.64
4 Click competitor name to see calculations.
The Enterprise Value to EBITDA (EV/EBITDA) ratio for the period between 2015 and 2019 exhibits substantial volatility, primarily dictated by fluctuations in operational earnings rather than shifts in the overall enterprise valuation. While the enterprise value remained relatively consistent, shifting within a range of approximately $48.9 billion to $55.4 billion, the EBITDA experienced significant swings that created an inverse correlation with the valuation multiple.
- Enterprise Value Trends
- The enterprise value showed a gradual increase from 2015 to 2017, reaching a peak of $55,363 million before entering a mild decline to $51,629 million by the end of 2019. This indicates a relatively stable market perception of the total firm value throughout the analyzed timeframe.
- EBITDA Volatility
- Earnings before interest, tax, depreciation, and amortization were characterized by significant instability. A sharp contraction occurred in 2016, with EBITDA falling to $3,697 million from $7,432 million in 2015. A subsequent recovery followed, culminating in a peak of $9,305 million in 2018, before retreating to $5,977 million in 2019.
- EV/EBITDA Ratio Dynamics
- The valuation multiple reacted inversely to earnings performance. The ratio spiked to a period high of 13.39 in 2016, coinciding with the lowest EBITDA level. Conversely, the ratio reached its lowest point of 5.90 in 2018 when EBITDA reached its maximum. By 2019, the ratio moderated to 8.64, reflecting the simultaneous decline in both enterprise value and EBITDA from their respective 2017 and 2018 peaks.
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