Intrinsic value of Phillips 66 - PSX

Previous Close

$110.90

  Intrinsic Value

$260.92

stock screener

  Rating & Target

str. buy

+135%

Previous close

$110.90

 
Intrinsic value

$260.92

 
Up/down potential

+135%

 
Rating

str. buy

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 2017), $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 57.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  22.00
  20.30
  18.77
  17.39
  16.15
  15.04
  14.03
  13.13
  12.32
  11.59
  10.93
  10.33
  9.80
  9.32
  8.89
  8.50
  8.15
  7.84
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
Revenue, $m
  127,639
  153,550
  182,371
  214,091
  248,674
  286,070
  326,219
  369,055
  414,515
  462,541
  513,086
  566,112
  621,598
  679,539
  739,943
  802,839
  868,272
  936,302
  1,007,008
  1,080,484
  1,156,839
  1,236,200
  1,318,705
  1,404,509
  1,493,780
  1,586,700
  1,683,463
  1,784,278
  1,889,366
  1,998,963
Variable operating expenses, $m
  117,464
  141,225
  167,655
  196,744
  228,458
  262,752
  299,570
  338,852
  380,540
  424,582
  470,519
  519,146
  570,029
  623,162
  678,555
  736,234
  796,238
  858,624
  923,464
  990,844
  1,060,865
  1,133,641
  1,209,302
  1,287,987
  1,369,852
  1,455,063
  1,543,798
  1,636,249
  1,732,619
  1,833,124
Fixed operating expenses, $m
  4,388
  4,485
  4,584
  4,685
  4,788
  4,893
  5,001
  5,111
  5,223
  5,338
  5,455
  5,575
  5,698
  5,823
  5,951
  6,082
  6,216
  6,353
  6,493
  6,636
  6,782
  6,931
  7,083
  7,239
  7,398
  7,561
  7,727
  7,897
  8,071
  8,249
Total operating expenses, $m
  121,852
  145,710
  172,239
  201,429
  233,246
  267,645
  304,571
  343,963
  385,763
  429,920
  475,974
  524,721
  575,727
  628,985
  684,506
  742,316
  802,454
  864,977
  929,957
  997,480
  1,067,647
  1,140,572
  1,216,385
  1,295,226
  1,377,250
  1,462,624
  1,551,525
  1,644,146
  1,740,690
  1,841,373
Operating income, $m
  5,786
  7,839
  10,132
  12,662
  15,429
  18,426
  21,649
  25,093
  28,752
  32,621
  37,112
  41,391
  45,872
  50,553
  55,436
  60,523
  65,818
  71,325
  77,051
  83,004
  89,193
  95,628
  102,320
  109,283
  116,530
  124,076
  131,937
  140,131
  148,676
  157,591
EBITDA, $m
  9,290
  11,970
  14,960
  18,258
  21,861
  25,763
  29,958
  34,438
  39,198
  44,229
  49,528
  55,091
  60,914
  66,998
  73,343
  79,952
  86,830
  93,984
  101,421
  109,152
  117,189
  125,544
  134,233
  143,272
  152,679
  162,474
  172,677
  183,311
  194,399
  205,966
Interest expense (income), $m
  311
  546
  895
  1,287
  1,723
  2,203
  2,726
  3,292
  3,899
  4,548
  5,235
  5,962
  6,726
  7,529
  8,368
  9,244
  10,158
  11,110
  12,100
  13,129
  14,198
  15,310
  16,465
  17,666
  18,914
  20,212
  21,562
  22,968
  24,432
  25,957
  27,547
Earnings before tax, $m
  5,240
  6,944
  8,844
  10,939
  13,225
  15,699
  18,357
  21,193
  24,204
  27,386
  31,150
  34,665
  38,343
  42,185
  46,192
  50,365
  54,708
  59,226
  63,923
  68,806
  73,883
  79,163
  84,655
  90,369
  96,318
  102,514
  108,970
  115,700
  122,719
  130,044
Tax expense, $m
  1,415
  1,875
  2,388
  2,954
  3,571
  4,239
  4,956
  5,722
  6,535
  7,394
  8,410
  9,359
  10,353
  11,390
  12,472
  13,599
  14,771
  15,991
  17,259
  18,578
  19,948
  21,374
  22,857
  24,400
  26,006
  27,679
  29,422
  31,239
  33,134
  35,112
Net income, $m
  3,825
  5,069
  6,456
  7,986
  9,654
  11,460
  13,400
  15,471
  17,669
  19,992
  22,739
  25,305
  27,990
  30,795
  33,720
  36,767
  39,937
  43,235
  46,664
  50,228
  53,935
  57,789
  61,798
  65,970
  70,312
  74,835
  79,548
  84,461
  89,585
  94,932

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  66,340
  79,807
  94,787
  111,274
  129,248
  148,685
  169,553
  191,817
  215,444
  240,406
  266,677
  294,237
  323,076
  353,191
  384,586
  417,276
  451,285
  486,643
  523,393
  561,582
  601,268
  642,516
  685,398
  729,995
  776,393
  824,688
  874,981
  927,379
  981,999
  1,038,962
Adjusted assets (=assets-cash), $m
  66,340
  79,807
  94,787
  111,274
  129,248
  148,685
  169,553
  191,817
  215,444
  240,406
  266,677
  294,237
  323,076
  353,191
  384,586
  417,276
  451,285
  486,643
  523,393
  561,582
  601,268
  642,516
  685,398
  729,995
  776,393
  824,688
  874,981
  927,379
  981,999
  1,038,962
Revenue / Adjusted assets
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
  1.924
Average production assets, $m
  30,889
  37,159
  44,134
  51,810
  60,179
  69,229
  78,945
  89,311
  100,313
  111,935
  124,167
  136,999
  150,427
  164,448
  179,066
  194,287
  210,122
  226,585
  243,696
  261,477
  279,955
  299,160
  319,127
  339,891
  361,495
  383,981
  407,398
  431,795
  457,227
  483,749
Working capital, $m
  -5,616
  -6,756
  -8,024
  -9,420
  -10,942
  -12,587
  -14,354
  -16,238
  -18,239
  -20,352
  -22,576
  -24,909
  -27,350
  -29,900
  -32,557
  -35,325
  -38,204
  -41,197
  -44,308
  -47,541
  -50,901
  -54,393
  -58,023
  -61,798
  -65,726
  -69,815
  -74,072
  -78,508
  -83,132
  -87,954
Total debt, $m
  16,581
  23,840
  31,914
  40,801
  50,489
  60,965
  72,213
  84,213
  96,949
  110,403
  124,563
  139,418
  154,962
  171,194
  188,116
  205,736
  224,066
  243,125
  262,933
  283,517
  304,907
  327,140
  350,253
  374,291
  399,300
  425,331
  452,439
  480,682
  510,122
  540,825
Total liabilities, $m
  35,757
  43,016
  51,090
  59,977
  69,665
  80,141
  91,389
  103,389
  116,125
  129,579
  143,739
  158,594
  174,138
  190,370
  207,292
  224,912
  243,242
  262,301
  282,109
  302,693
  324,083
  346,316
  369,429
  393,467
  418,476
  444,507
  471,615
  499,858
  529,298
  560,001
Total equity, $m
  30,583
  36,791
  43,697
  51,297
  59,584
  68,544
  78,164
  88,427
  99,320
  110,827
  122,938
  135,643
  148,938
  162,821
  177,294
  192,364
  208,042
  224,343
  241,284
  258,889
  277,184
  296,200
  315,968
  336,527
  357,917
  380,181
  403,366
  427,522
  452,702
  478,962
Total liabilities and equity, $m
  66,340
  79,807
  94,787
  111,274
  129,249
  148,685
  169,553
  191,816
  215,445
  240,406
  266,677
  294,237
  323,076
  353,191
  384,586
  417,276
  451,284
  486,644
  523,393
  561,582
  601,267
  642,516
  685,397
  729,994
  776,393
  824,688
  874,981
  927,380
  982,000
  1,038,963
Debt-to-equity ratio
  0.540
  0.650
  0.730
  0.800
  0.850
  0.890
  0.920
  0.950
  0.980
  1.000
  1.010
  1.030
  1.040
  1.050
  1.060
  1.070
  1.080
  1.080
  1.090
  1.100
  1.100
  1.100
  1.110
  1.110
  1.120
  1.120
  1.120
  1.120
  1.130
  1.130
Adjusted equity ratio
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,825
  5,069
  6,456
  7,986
  9,654
  11,460
  13,400
  15,471
  17,669
  19,992
  22,739
  25,305
  27,990
  30,795
  33,720
  36,767
  39,937
  43,235
  46,664
  50,228
  53,935
  57,789
  61,798
  65,970
  70,312
  74,835
  79,548
  84,461
  89,585
  94,932
Depreciation, amort., depletion, $m
  3,503
  4,130
  4,828
  5,596
  6,433
  7,338
  8,309
  9,346
  10,446
  11,608
  12,417
  13,700
  15,043
  16,445
  17,907
  19,429
  21,012
  22,659
  24,370
  26,148
  27,996
  29,916
  31,913
  33,989
  36,149
  38,398
  40,740
  43,180
  45,723
  48,375
Funds from operations, $m
  7,329
  9,200
  11,284
  13,581
  16,087
  18,798
  21,710
  24,817
  28,115
  31,600
  35,156
  39,005
  43,033
  47,240
  51,627
  56,195
  60,949
  65,893
  71,033
  76,376
  81,930
  87,705
  93,711
  99,959
  106,462
  113,233
  120,288
  127,640
  135,308
  143,307
Change in working capital, $m
  -1,013
  -1,140
  -1,268
  -1,396
  -1,522
  -1,645
  -1,767
  -1,885
  -2,000
  -2,113
  -2,224
  -2,333
  -2,441
  -2,549
  -2,658
  -2,767
  -2,879
  -2,993
  -3,111
  -3,233
  -3,360
  -3,492
  -3,630
  -3,775
  -3,928
  -4,088
  -4,258
  -4,436
  -4,624
  -4,822
Cash from operations, $m
  8,342
  10,340
  12,552
  14,977
  17,609
  20,443
  23,476
  26,702
  30,115
  33,713
  37,380
  41,338
  45,474
  49,789
  54,284
  58,963
  63,828
  68,887
  74,144
  79,609
  85,290
  91,197
  97,341
  103,734
  110,390
  117,322
  124,545
  132,076
  139,932
  148,130
Maintenance CAPEX, $m
  -2,531
  -3,089
  -3,716
  -4,413
  -5,181
  -6,018
  -6,923
  -7,895
  -8,931
  -10,031
  -11,193
  -12,417
  -13,700
  -15,043
  -16,445
  -17,907
  -19,429
  -21,012
  -22,659
  -24,370
  -26,148
  -27,996
  -29,916
  -31,913
  -33,989
  -36,149
  -38,398
  -40,740
  -43,180
  -45,723
New CAPEX, $m
  -5,579
  -6,270
  -6,975
  -7,676
  -8,369
  -9,050
  -9,716
  -10,366
  -11,001
  -11,622
  -12,232
  -12,832
  -13,428
  -14,022
  -14,618
  -15,221
  -15,835
  -16,463
  -17,111
  -17,781
  -18,478
  -19,205
  -19,966
  -20,765
  -21,604
  -22,487
  -23,417
  -24,397
  -25,431
  -26,522
Cash from investing activities, $m
  -8,110
  -9,359
  -10,691
  -12,089
  -13,550
  -15,068
  -16,639
  -18,261
  -19,932
  -21,653
  -23,425
  -25,249
  -27,128
  -29,065
  -31,063
  -33,128
  -35,264
  -37,475
  -39,770
  -42,151
  -44,626
  -47,201
  -49,882
  -52,678
  -55,593
  -58,636
  -61,815
  -65,137
  -68,611
  -72,245
Free cash flow, $m
  232
  980
  1,862
  2,887
  4,058
  5,376
  6,837
  8,441
  10,183
  12,059
  13,955
  16,089
  18,347
  20,725
  23,222
  25,835
  28,565
  31,411
  34,375
  37,458
  40,664
  43,996
  47,459
  51,057
  54,797
  58,686
  62,730
  66,939
  71,321
  75,884
Issuance/(repayment) of debt, $m
  6,471
  7,259
  8,074
  8,886
  9,688
  10,476
  11,247
  12,000
  12,735
  13,454
  14,160
  14,855
  15,544
  16,232
  16,922
  17,620
  18,331
  19,058
  19,808
  20,584
  21,391
  22,233
  23,114
  24,038
  25,009
  26,031
  27,108
  28,243
  29,440
  30,703
Issuance/(repurchase) of shares, $m
  1,673
  1,139
  449
  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  
  8,144
  8,398
  8,523
  8,886
  9,688
  10,476
  11,247
  12,000
  12,735
  13,454
  14,160
  14,855
  15,544
  16,232
  16,922
  17,620
  18,331
  19,058
  19,808
  20,584
  21,391
  22,233
  23,114
  24,038
  25,009
  26,031
  27,108
  28,243
  29,440
  30,703
Total cash flow (excl. dividends), $m
  8,376
  9,378
  10,385
  11,773
  13,747
  15,852
  18,085
  20,441
  22,918
  25,514
  28,115
  30,944
  33,891
  36,957
  40,144
  43,455
  46,896
  50,469
  54,183
  58,042
  62,055
  66,229
  70,572
  75,094
  79,806
  84,717
  89,838
  95,182
  100,761
  106,588
Retained Cash Flow (-), $m
  -5,498
  -6,208
  -6,906
  -7,600
  -8,286
  -8,960
  -9,620
  -10,264
  -10,892
  -11,507
  -12,111
  -12,705
  -13,295
  -13,883
  -14,473
  -15,070
  -15,678
  -16,300
  -16,941
  -17,605
  -18,295
  -19,015
  -19,769
  -20,559
  -21,390
  -22,264
  -23,185
  -24,156
  -25,180
  -26,260
Prev. year cash balance distribution, $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 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
  2,878
  3,170
  3,480
  4,173
  5,460
  6,892
  8,465
  10,177
  12,026
  14,006
  16,004
  18,239
  20,596
  23,074
  25,671
  28,385
  31,218
  34,169
  37,241
  40,437
  43,760
  47,213
  50,803
  54,535
  58,416
  62,453
  66,653
  71,026
  75,581
  80,328
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  2,759
  2,902
  3,028
  3,436
  4,233
  5,002
  5,719
  6,361
  6,908
  7,343
  7,600
  7,783
  7,831
  7,746
  7,536
  7,213
  6,792
  6,293
  5,734
  5,138
  4,526
  3,917
  3,330
  2,778
  2,272
  1,822
  1,431
  1,099
  825
  605
Current shareholders' claim on cash, %
  97.2
  95.6
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1

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 37
Price to Sales 0.7
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 19.4
Price to Free Cash Flow 483.5
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 $104622 million for the last fiscal year's total revenue generated by Phillips 66. The default revenue input number comes from 2017 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 22% 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 4.3%, 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 92.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4294 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 5.4% 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 24.2%.

Life of production assets of 10 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 -4.4%. 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 - $25085 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 515 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 $57.1 billion.

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COMPANY NEWS

▶ Is Phillips 66 a Buy?   [Jul-19-18 07:31AM  Motley Fool]
▶ The Permian Banks On These Key Pipelines   [Jul-12-18 07:00PM  Oilprice.com]
▶ Phillips 66 Announces Quarterly Dividend   [Jul-11-18 12:51PM  Business Wire]
▶ Company plans to finish Louisiana oil pipeline by October   [Jun-27-18 04:12PM  Associated Press]
▶ Final Trade: GE, PSX and more   [09:32AM  CNBC Videos]
▶ 3 Top Energy Stocks to Buy Right Now   [Jun-24-18 09:27AM  Motley Fool]
▶ Should You Be Holding Phillips 66 Partners LP (NYSE:PSXP)?   [Jun-22-18 12:06PM  Simply Wall St.]
▶ Phillips 66 to Announce Second-Quarter Financial Results   [Jun-21-18 03:00PM  Business Wire]
▶ The 3 Biggest Challenges Facing Phillips 66 Partners   [Jun-20-18 08:19AM  Motley Fool]
▶ Investors Should Follow Buffett Into Phillips 66 Stock   [Jun-15-18 05:02PM  InvestorPlace]
▶ Phillips 66 Refills Its Growth Engine   [Jun-14-18 12:04PM  Motley Fool]
▶ Phillips 66 To Expand Texas Natural Gas Liquids Project   [Jun-12-18 08:00PM  Rigzone.com]
▶ New Fuel Rules Good News for Marathon, Phillips 66   [May-29-18 10:48AM  Barrons.com]
▶ 8 Energy Stocks For The New Oil Boom   [May-25-18 02:00PM  Investopedia]
▶ Are Venezuelan And Iranian Oil Exports About To Plunge?   [May-24-18 01:00PM  Oilprice.com]
▶ Stocks Warren Buffett Is Selling   [May-22-18 09:30PM  Motley Fool]
▶ Buffett's 3 Most Important Stock Sales in 2018   [May-21-18 09:42AM  Motley Fool]
▶ Buy These Energy Stocks on Crude Oil Price Surge   [May-18-18 01:34PM  Investopedia]
▶ 10 Small-Cap Oil & Gas Stocks to Watch   [May-17-18 03:27PM  InvestorPlace]
▶ Is Phillips 66 a Buy?   [May-16-18 11:16AM  Motley Fool]
▶ Warren Buffetts Best Dividend Stocks   [10:43AM  InvestorPlace]
▶ CEO: Phillips 66 doesn't plan to invest directly in Mexico   [May-14-18 09:14AM  American City Business Journals]
▶ Houston midstream co. cancels pipeline open season   [May-08-18 02:13PM  American City Business Journals]
▶ Enterprise and partners to restore service on pipeline, expand capacity on others   [May-07-18 01:47PM  American City Business Journals]
▶ Warren Buffett: Why we sold shares in Phillips 66   [May-05-18 03:21PM  Yahoo Finance Video]
▶ Chevron Phillips to make investment decision next year on second Baytown cracker   [May-02-18 03:22PM  American City Business Journals]
▶ Federal judge skeptical about pipeline's impact on wetlands   [Apr-30-18 04:17PM  Associated Press]
▶ Crude Oil Price Forecast: Fragile Sentiment   [Apr-29-18 09:13PM  Investopedia]
▶ Warren Buffett-Backed Oil Refiner Phillips 66 Earnings Top Views   [Apr-27-18 04:04PM  Investor's Business Daily]
▶ Energy giants Phillips 66, Exxon Mobil, Chevron report Q1 earnings   [01:41PM  American City Business Journals]
▶ Phillips 66 to Host Earnings Call   [10:00AM  ACCESSWIRE]
▶ Phillips 66: 1Q Earnings Snapshot   [07:25AM  Associated Press]
▶ U.S. Oil Exports Are Only Heading Higher   [Apr-26-18 07:00PM  Oilprice.com]
▶ Andeavor enters into joint venture for pipeline   [02:12PM  American City Business Journals]
▶ Despite Today's Market, Baozun And Solaredge Technologies Join Sector Leaders   [Apr-24-18 06:20PM  Investor's Business Daily]
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