Intrinsic value of Phillips 66 - PSX

Previous Close

$89.89

  Intrinsic Value

$137.47

stock screener

  Rating & Target

str. buy

+53%

  Value-price divergence*

+103%

Previous close

$89.89

 
Intrinsic value

$137.47

 
Up/down potential

+53%

 
Rating

str. buy

 
Value-price divergence*

+103%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PSX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 45.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -14.39
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.87
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.59
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
Revenue, $m
  84,730
  92,271
  100,123
  108,292
  116,786
  125,613
  134,787
  144,320
  154,228
  164,528
  175,241
  186,386
  197,986
  210,066
  222,652
  235,771
  249,453
  263,728
  278,630
  294,192
  310,452
  327,447
  345,216
  363,803
  383,251
  403,605
  424,916
  447,232
  470,608
  495,099
  520,763
Variable operating expenses, $m
 
  72,680
  78,838
  85,243
  91,903
  98,826
  106,019
  113,494
  121,263
  129,340
  137,740
  146,153
  155,249
  164,721
  174,591
  184,878
  195,606
  206,800
  218,485
  230,688
  243,438
  256,764
  270,698
  285,273
  300,522
  316,483
  333,194
  350,693
  369,023
  388,227
  408,352
Fixed operating expenses, $m
 
  17,422
  17,857
  18,304
  18,762
  19,231
  19,711
  20,204
  20,709
  21,227
  21,758
  22,302
  22,859
  23,431
  24,016
  24,617
  25,232
  25,863
  26,510
  27,172
  27,852
  28,548
  29,262
  29,993
  30,743
  31,511
  32,299
  33,107
  33,934
  34,783
  35,652
Total operating expenses, $m
  83,325
  90,102
  96,695
  103,547
  110,665
  118,057
  125,730
  133,698
  141,972
  150,567
  159,498
  168,455
  178,108
  188,152
  198,607
  209,495
  220,838
  232,663
  244,995
  257,860
  271,290
  285,312
  299,960
  315,266
  331,265
  347,994
  365,493
  383,800
  402,957
  423,010
  444,004
Operating income, $m
  1,405
  2,169
  3,428
  4,745
  6,121
  7,557
  9,057
  10,622
  12,255
  13,961
  15,743
  17,932
  19,878
  21,914
  24,045
  26,277
  28,615
  31,065
  33,635
  36,332
  39,162
  42,135
  45,257
  48,537
  51,985
  55,610
  59,423
  63,432
  67,651
  72,089
  76,759
EBITDA, $m
  2,573
  3,599
  4,953
  6,367
  7,845
  9,387
  10,996
  12,675
  14,427
  16,256
  18,166
  20,161
  22,246
  24,427
  26,708
  29,097
  31,598
  34,220
  36,968
  39,851
  42,876
  46,051
  49,386
  52,889
  56,570
  60,438
  64,505
  68,782
  73,280
  78,011
  82,988
Interest expense (income), $m
  311
  336
  426
  519
  616
  717
  822
  930
  1,044
  1,161
  1,283
  1,411
  1,543
  1,680
  1,824
  1,973
  2,129
  2,291
  2,461
  2,638
  2,822
  3,015
  3,217
  3,428
  3,649
  3,879
  4,121
  4,374
  4,639
  4,916
  5,207
Earnings before tax, $m
  2,191
  1,833
  3,002
  4,226
  5,505
  6,841
  8,235
  9,691
  11,212
  12,800
  14,459
  16,521
  18,335
  20,234
  22,221
  24,303
  26,486
  28,774
  31,175
  33,694
  36,340
  39,119
  42,040
  45,109
  48,337
  51,731
  55,302
  59,059
  63,012
  67,173
  71,552
Tax expense, $m
  547
  495
  811
  1,141
  1,486
  1,847
  2,223
  2,617
  3,027
  3,456
  3,904
  4,461
  4,951
  5,463
  6,000
  6,562
  7,151
  7,769
  8,417
  9,097
  9,812
  10,562
  11,351
  12,179
  13,051
  13,967
  14,931
  15,946
  17,013
  18,137
  19,319
Net income, $m
  1,555
  1,338
  2,192
  3,085
  4,019
  4,994
  6,012
  7,075
  8,185
  9,344
  10,555
  12,060
  13,385
  14,771
  16,222
  17,741
  19,335
  21,005
  22,757
  24,597
  26,528
  28,557
  30,689
  32,930
  35,286
  37,764
  40,370
  43,113
  45,999
  49,036
  52,233

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,711
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  51,653
  53,305
  57,841
  62,561
  67,467
  72,567
  77,866
  83,374
  89,098
  95,048
  101,237
  107,675
  114,377
  121,355
  128,626
  136,205
  144,109
  152,356
  160,965
  169,955
  179,348
  189,166
  199,432
  210,169
  221,404
  233,163
  245,474
  258,366
  271,871
  286,019
  300,845
Adjusted assets (=assets-cash), $m
  48,942
  53,305
  57,841
  62,561
  67,467
  72,567
  77,866
  83,374
  89,098
  95,048
  101,237
  107,675
  114,377
  121,355
  128,626
  136,205
  144,109
  152,356
  160,965
  169,955
  179,348
  189,166
  199,432
  210,169
  221,404
  233,163
  245,474
  258,366
  271,871
  286,019
  300,845
Revenue / Adjusted assets
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
  1.731
Average production assets, $m
  21,185
  23,068
  25,031
  27,073
  29,196
  31,403
  33,697
  36,080
  38,557
  41,132
  43,810
  46,596
  49,497
  52,517
  55,663
  58,943
  62,363
  65,932
  69,657
  73,548
  77,613
  81,862
  86,304
  90,951
  95,813
  100,901
  106,229
  111,808
  117,652
  123,775
  130,191
Working capital, $m
  3,217
  1,107
  1,201
  1,300
  1,401
  1,507
  1,617
  1,732
  1,851
  1,974
  2,103
  2,237
  2,376
  2,521
  2,672
  2,829
  2,993
  3,165
  3,344
  3,530
  3,725
  3,929
  4,143
  4,366
  4,599
  4,843
  5,099
  5,367
  5,647
  5,941
  6,249
Total debt, $m
  10,138
  12,165
  14,828
  17,598
  20,478
  23,472
  26,583
  29,815
  33,175
  36,668
  40,301
  44,080
  48,014
  52,111
  56,379
  60,827
  65,467
  70,308
  75,361
  80,639
  86,152
  91,916
  97,941
  104,244
  110,839
  117,742
  124,968
  132,536
  140,463
  148,768
  157,471
Total liabilities, $m
  29,263
  31,290
  33,953
  36,723
  39,603
  42,597
  45,708
  48,940
  52,300
  55,793
  59,426
  63,205
  67,139
  71,236
  75,504
  79,952
  84,592
  89,433
  94,486
  99,764
  105,277
  111,041
  117,066
  123,369
  129,964
  136,867
  144,093
  151,661
  159,588
  167,893
  176,596
Total equity, $m
  22,390
  22,015
  23,888
  25,838
  27,864
  29,970
  32,159
  34,433
  36,797
  39,255
  41,811
  44,470
  47,238
  50,120
  53,123
  56,253
  59,517
  62,923
  66,478
  70,192
  74,071
  78,126
  82,365
  86,800
  91,440
  96,296
  101,381
  106,705
  112,283
  118,126
  124,249
Total liabilities and equity, $m
  51,653
  53,305
  57,841
  62,561
  67,467
  72,567
  77,867
  83,373
  89,097
  95,048
  101,237
  107,675
  114,377
  121,356
  128,627
  136,205
  144,109
  152,356
  160,964
  169,956
  179,348
  189,167
  199,431
  210,169
  221,404
  233,163
  245,474
  258,366
  271,871
  286,019
  300,845
Debt-to-equity ratio
  0.453
  0.550
  0.620
  0.680
  0.730
  0.780
  0.830
  0.870
  0.900
  0.930
  0.960
  0.990
  1.020
  1.040
  1.060
  1.080
  1.100
  1.120
  1.130
  1.150
  1.160
  1.180
  1.190
  1.200
  1.210
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
Adjusted equity ratio
  0.402
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,555
  1,338
  2,192
  3,085
  4,019
  4,994
  6,012
  7,075
  8,185
  9,344
  10,555
  12,060
  13,385
  14,771
  16,222
  17,741
  19,335
  21,005
  22,757
  24,597
  26,528
  28,557
  30,689
  32,930
  35,286
  37,764
  40,370
  43,113
  45,999
  49,036
  52,233
Depreciation, amort., depletion, $m
  1,168
  1,431
  1,525
  1,622
  1,724
  1,830
  1,939
  2,053
  2,172
  2,295
  2,423
  2,229
  2,368
  2,513
  2,663
  2,820
  2,984
  3,155
  3,333
  3,519
  3,714
  3,917
  4,129
  4,352
  4,584
  4,828
  5,083
  5,350
  5,629
  5,922
  6,229
Funds from operations, $m
  3,464
  2,769
  3,716
  4,707
  5,743
  6,823
  7,951
  9,128
  10,356
  11,639
  12,979
  14,290
  15,753
  17,283
  18,885
  20,562
  22,318
  24,160
  26,090
  28,116
  30,242
  32,474
  34,818
  37,281
  39,870
  42,592
  45,453
  48,462
  51,628
  54,958
  58,462
Change in working capital, $m
  501
  90
  94
  98
  102
  106
  110
  114
  119
  124
  129
  134
  139
  145
  151
  157
  164
  171
  179
  187
  195
  204
  213
  223
  233
  244
  256
  268
  281
  294
  308
Cash from operations, $m
  2,963
  2,678
  3,622
  4,609
  5,641
  6,717
  7,841
  9,014
  10,238
  11,515
  12,850
  14,156
  15,614
  17,138
  18,734
  20,404
  22,154
  23,988
  25,912
  27,929
  30,047
  32,270
  34,605
  37,058
  39,637
  42,347
  45,197
  48,195
  51,347
  54,664
  58,154
Maintenance CAPEX, $m
  0
  -1,014
  -1,104
  -1,198
  -1,295
  -1,397
  -1,503
  -1,612
  -1,726
  -1,845
  -1,968
  -2,096
  -2,229
  -2,368
  -2,513
  -2,663
  -2,820
  -2,984
  -3,155
  -3,333
  -3,519
  -3,714
  -3,917
  -4,129
  -4,352
  -4,584
  -4,828
  -5,083
  -5,350
  -5,629
  -5,922
New CAPEX, $m
  -2,844
  -1,883
  -1,963
  -2,042
  -2,123
  -2,207
  -2,293
  -2,383
  -2,477
  -2,575
  -2,678
  -2,786
  -2,900
  -3,020
  -3,146
  -3,280
  -3,420
  -3,569
  -3,725
  -3,891
  -4,065
  -4,249
  -4,442
  -4,647
  -4,862
  -5,089
  -5,328
  -5,579
  -5,844
  -6,123
  -6,416
Cash from investing activities, $m
  -3,158
  -2,897
  -3,067
  -3,240
  -3,418
  -3,604
  -3,796
  -3,995
  -4,203
  -4,420
  -4,646
  -4,882
  -5,129
  -5,388
  -5,659
  -5,943
  -6,240
  -6,553
  -6,880
  -7,224
  -7,584
  -7,963
  -8,359
  -8,776
  -9,214
  -9,673
  -10,156
  -10,662
  -11,194
  -11,752
  -12,338
Free cash flow, $m
  -195
  -218
  555
  1,369
  2,222
  3,113
  4,045
  5,018
  6,034
  7,095
  8,204
  9,274
  10,484
  11,750
  13,075
  14,461
  15,914
  17,436
  19,031
  20,706
  22,463
  24,308
  26,246
  28,282
  30,423
  32,674
  35,042
  37,533
  40,154
  42,912
  45,816
Issuance/(repayment) of debt, $m
  1,257
  2,577
  2,663
  2,770
  2,880
  2,994
  3,111
  3,233
  3,360
  3,493
  3,633
  3,779
  3,934
  4,096
  4,268
  4,449
  4,640
  4,841
  5,053
  5,277
  5,514
  5,763
  6,026
  6,303
  6,595
  6,903
  7,227
  7,568
  7,927
  8,305
  8,703
Issuance/(repurchase) of shares, $m
  -82
  448
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,104
  3,025
  2,663
  2,770
  2,880
  2,994
  3,111
  3,233
  3,360
  3,493
  3,633
  3,779
  3,934
  4,096
  4,268
  4,449
  4,640
  4,841
  5,053
  5,277
  5,514
  5,763
  6,026
  6,303
  6,595
  6,903
  7,227
  7,568
  7,927
  8,305
  8,703
Total cash flow (excl. dividends), $m
  919
  2,807
  3,218
  4,140
  5,102
  6,107
  7,156
  8,251
  9,394
  10,588
  11,837
  13,053
  14,418
  15,847
  17,343
  18,910
  20,553
  22,276
  24,085
  25,983
  27,976
  30,071
  32,272
  34,585
  37,018
  39,577
  42,268
  45,101
  48,081
  51,218
  54,519
Retained Cash Flow (-), $m
  710
  -1,786
  -1,873
  -1,949
  -2,026
  -2,106
  -2,189
  -2,274
  -2,364
  -2,458
  -2,556
  -2,659
  -2,768
  -2,882
  -3,003
  -3,130
  -3,264
  -3,406
  -3,555
  -3,713
  -3,879
  -4,055
  -4,240
  -4,435
  -4,640
  -4,856
  -5,084
  -5,325
  -5,577
  -5,843
  -6,123
Prev. year cash balance distribution, $m
 
  2,161
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,182
  1,345
  2,191
  3,076
  4,001
  4,967
  5,976
  7,030
  8,131
  9,281
  10,394
  11,650
  12,964
  14,340
  15,780
  17,289
  18,871
  20,529
  22,270
  24,097
  26,016
  28,032
  30,151
  32,378
  34,720
  37,184
  39,776
  42,504
  45,374
  48,396
Discount rate, %
 
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for distribution, $m
 
  3,022
  1,207
  1,847
  2,424
  2,928
  3,354
  3,697
  3,954
  4,125
  4,211
  4,180
  4,113
  3,976
  3,779
  3,532
  3,247
  2,934
  2,607
  2,276
  1,951
  1,642
  1,355
  1,095
  867
  672
  509
  376
  271
  190
  130
Current shareholders' claim on cash, %
  100
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9

Phillips 66 is an energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses. The Company operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment gathers, processes, transports and markets natural gas, and transports, stores, fractionates and markets natural gas liquids (NGLs) in the United States. The Chemicals segment consists of its equity investment in Chevron Phillips Chemical Company LLC (CPChem), which manufactures and markets petrochemicals and plastics. The Refining segment buys, sells and refines crude oil and other feedstocks at refineries in the United States and Europe. The M&S segment purchases for resale and markets refined petroleum products, such as gasolines, distillates and aviation fuels, primarily in the United States and Europe, as well as includes the manufacturing and marketing of specialty products, and power generation operations.

FINANCIAL RATIOS  of  Phillips 66 (PSX)

Valuation Ratios
P/E Ratio 30
Price to Sales 0.6
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 15.7
Price to Free Cash Flow 391.9
Growth Rates
Sales Growth Rate -14.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50.7%
Cap. Spend. - 3 Yr. Gr. Rate 9.8%
Financial Strength
Quick Ratio 5
Current Ratio 0.1
LT Debt to Equity 42.8%
Total Debt to Equity 45.3%
Interest Coverage 8
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. 11.6%
Return On Equity 6.8%
Return On Equity - 3 Yr. Avg. 15.9%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 26.2%
Gross Margin - 3 Yr. Avg. 22.6%
EBITDA Margin 4.3%
EBITDA Margin - 3 Yr. Avg. 5.4%
Operating Margin 1.7%
Oper. Margin - 3 Yr. Avg. 2.7%
Pre-Tax Margin 2.6%
Pre-Tax Margin - 3 Yr. Avg. 4.1%
Net Profit Margin 1.8%
Net Profit Margin - 3 Yr. Avg. 3%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 27.6%
Payout Ratio 82.4%

PSX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PSX stock intrinsic value calculation we used $84730 million for the last fiscal year's total revenue generated by Phillips 66. The default revenue input number comes from 2016 income statement of Phillips 66. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PSX stock valuation model: a) initial revenue growth rate of 8.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.3%, whose default value for PSX is calculated based on our internal credit rating of Phillips 66, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Phillips 66.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PSX stock the variable cost ratio is equal to 78.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $16997 million in the base year in the intrinsic value calculation for PSX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Phillips 66.

Corporate tax rate of 27% is the nominal tax rate for Phillips 66. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PSX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PSX are equal to 25%.

Life of production assets of 20.9 years is the average useful life of capital assets used in Phillips 66 operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PSX is equal to 1.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $22390 million for Phillips 66 - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 508.751 million for Phillips 66 is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Phillips 66 at the current share price and the inputted number of shares is $45.7 billion.

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COMPANY NEWS

▶ BP: Boring is Beautiful   [02:54PM  Barrons.com]
▶ Behind Phillips 66s Segmental Earnings Trends   [10:37AM  Market Realist]
▶ Understanding Phillips 66s Cash Flow   [07:36AM  Market Realist]
▶ [$$] Hurricanes Stir Up Profits for Refiners   [12:44AM  The Wall Street Journal]
▶ [$$] Hurricanes Stir Up Profits for Refiners   [Sep-17-17 08:36AM  The Wall Street Journal]
▶ How Phillips 66s Leverage Curve Is Trending   [10:37AM  Market Realist]
▶ Why Has Short Interest in Phillips 66 Fallen?   [09:08AM  Market Realist]
▶ Institutional Ownership in Phillips 66: Whos Buying PSX   [Sep-14-17 10:38AM  Market Realist]
▶ Where Phillips 66s Analysts Are Leaning Now   [08:07AM  Market Realist]
▶ [$$] Hurricanes Mean Small Refiners Gain   [03:28PM  Barrons.com]
▶ Behind Phillips 66s Moving Averages in 3Q17   [01:36PM  Market Realist]
▶ These 3 Charts Prove Oil May Be Bottoming   [10:07AM  InvestorPlace]
▶ MPCs Segmental Earnings Trend in 2Q17   [Sep-11-17 10:36AM  Market Realist]
▶ Houstons Energy Sector Confident Of A Quick Recovery   [Sep-09-17 01:00PM  Oilprice.com]
▶ How Is Marathon Petroleums Leverage Trending?   [Sep-08-17 10:36AM  Market Realist]
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▶ Marathon Petroleums Moving Averages: What Do They Indicate?   [Sep-06-17 02:36PM  Market Realist]
▶ Motiva's Port Arthur refinery to return to service this weekend   [Sep-05-17 04:25PM  American City Business Journals]
▶ Harveys Long-Term Impact On Oil Markets   [04:00PM  Oilprice.com]
▶ Gas prices spike as refineries remain shut   [Sep-04-17 08:32PM  Associated Press]
▶ Oil Prices Sag As Gasoline Prices Peak   [Sep-01-17 03:00PM  Oilprice.com]
▶ No official timeline for Motiva refinery restart; Gas prices surge   [09:30AM  American City Business Journals]
▶ [$$] Harvey aftermath hits a third of US oil refineries   [Aug-31-17 11:03PM  Financial Times]
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▶ Motiva shuts largest refinery in U.S. due to Harvey floods   [03:00PM  American City Business Journals]
▶ The Upcoming Oil Price Rebound   [03:00PM  Oilprice.com]
▶ Behind Delek US Holdings Scant Buy Ratings   [10:38AM  Market Realist]
▶ How Much Will Gasoline Prices Jump? This Refiner Breaks Out   [04:06PM  Investor's Business Daily]
▶ Refining Margins in 2Q17: A Comparison   [09:06AM  Market Realist]
▶ Comparing Refiners Cash Flow in 1H17   [09:06AM  Market Realist]
▶ A Look at Refiners Leverage in 2Q17   [07:35AM  Market Realist]
▶ Forget Sunoco LP: These 3 Stocks Are Better Buys   [Aug-23-17 01:21PM  Motley Fool]
▶ Your MLP Ratings Updates from Last Week   [Aug-22-17 12:10PM  Market Realist]
▶ Price Forecasts for MPC, ANDV, VLO, and PSX   [10:37AM  Market Realist]
▶ How Andeavors Valuation Stacks up with Peers   [Aug-21-17 09:05AM  Market Realist]
▶ Forecasting Andeavors Stock Price   [07:36AM  Market Realist]
▶ Andeavors Stock Performance So Far in 3Q17   [Aug-17-17 09:06AM  Market Realist]
▶ ETFs with exposure to Phillips 66 : August 16, 2017   [Aug-16-17 06:27PM  Capital Cube]
Financial statements of PSX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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