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Last update on 2024-06-06

Phillips 66 (PSX) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Phillips 66 (PSX) Piotroski F-Score Analysis for 2023 shows a score of 5/9. Assessing profitability, liquidity, and efficiency for better investment insights.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 5

We're running Phillips 66 (PSX) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

Phillips 66 (PSX) has an intermediate Piotroski F-Score of 5 out of 9, indicating a moderate strength in its financial position. For profitability, the company showed positive net income and cash flow and had operating cash flow greater than net income. However, its return on assets decreased. Under liquidity, the leverage ratio increased and the current ratio decreased, suggesting some concerns. For operational efficiency, while the company improved its gross margin and reduced share dilution, its asset turnover ratio fell, pointing to inefficiencies in using assets to generate revenue.

Insights for Value Investors Seeking Stable Income

Phillips 66 shows moderate financial health with both strengths and areas that need improvement. The positive income and cash flow are good signs, but the decreases in return on assets and asset turnover could be troubling for long-term growth. If you're considering investing in Phillips 66, it might be worth doing further research into why certain areas are not performing as well and if the company has plans to address these weaknesses. Overall, it is worth considering but approach with some caution.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Phillips 66 (PSX)

Company has a positive net income?

Evaluating whether Phillips 66's net income is positive is crucial because it indicates profitability and operational efficiency. A positive net income suggests the company is generating more revenue than expense it incurs.

Historical Net Income of Phillips 66 (PSX)

For the fiscal year of 2023, Phillips 66 posted a net income of $7.015 billion, which is undeniably positive. Comparing this to previous years: in 2022, it was $11.024 billion, and in 2021, it was $1.315 billion, showing the highest peak in recent performance but still a notable amount. The trend of positive earnings over time, save for 2020 with a loss of $3.975 billion, illustrates the company's capability to bounce back and maintain profitability. Hence, for this criterion, Phillips 66 earns 1 point reflecting its strong financial health.

Company has a positive cash flow?

Operating cash flow (CFO) represents the cash a company generates from its regular business operations. Positive CFO is crucial for funding operational needs without relying on external capital.

Historical Operating Cash Flow of Phillips 66 (PSX)

For Phillips 66, the CFO in 2023 stands at $7,029,000,000, which is indeed positive. This is a favorable indicator as positive cash flow shows the company is efficiently generating sufficient cash from its operations. The trend over the last 15 years highlights a general upward movement with some variability, particularly peaking in 2022 at $10,813,000,000 before dropping slightly in 2023. Nevertheless, a consistent positive cash flow reflects robust operational efficiency, securing Phillips 66 a 1 point in the Piotroski Analysis for this criterion.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's profitability relative to its total assets. A higher ROA indicates more effective asset utilization.

Historical change in Return on Assets (ROA) of Phillips 66 (PSX)

The ROA for Phillips 66 decreased from 0.167 in 2022 to 0.0923 in 2023. This decline suggests a reduced efficiency in generating profits from its assets. Over the past 20 years, Phillips 66's variable ROA indicates fluctuating asset effectiveness, while the industry median ROA has remained relatively stable. The 2023 ROA is still above the long-term industry median of 0.0872, but the decrease from 2022's high points toward potential operational inefficiencies or external challenges faced by the company. Therefore, this criterion scores 0 points.

Operating Cashflow are higher than Netincome?

The criterion evaluates whether operating cash flow exceeds net income. This signifies strong cash generation ability and effective earnings quality.

Historical accruals of Phillips 66 (PSX)

In 2023, Phillips 66 reported an operating cash flow of $7.029 billion, outperforming its net income of $7.015 billion. This is positive as it indicates that the company's operations are generating healthy cash flow beyond its accounting profits, earning a 1 point. Historical data shows that operating cash flow generally exceeds net income, reflecting robust operational efficiency and financial health over time. Such consistency can reassure investors regarding the sustainability of earnings and operational performance.

Liquidity of Phillips 66 (PSX)

Leverage is declining?

Change in the ratio of total debt to equity from one year to the next.

Historical leverage of Phillips 66 (PSX)

Phillips 66’s leverage ratio increased from 0.218 in 2022 to 0.2368 in 2023, reflecting a slight rise in the company's debt levels in comparison to its equity. This increase indicates that Phillips 66 has taken on relatively more debt over the last year, which may raise concerns about its financial stability and risk profile. When examining the historical data, it's notable that the leverage ratio has experienced fluctuations, with significant highs during economic downturns such as the COVID-19 pandemic in 2020 when it peaked at 0.2724. This trend shows that while leverage levels can be volatile, an increase is generally viewed unfavorably from a risk management perspective, resulting in a score of 0 for this criterion.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets. It is an important indicator of a firm's financial health and its ability to meet its liabilities over the next 12 months.

Historical Current Ratio of Phillips 66 (PSX)

Comparing the Current Ratio of Phillips 66 (PSX), which was 1.2576 in 2023, to 1.3797 in 2022, it can be observed that the Current Ratio has decreased. Therefore, we assign 0 points for this criterion, as the ratio has not improved. Analyzing historical data, the Current Ratio has shown fluctuations, peaking at 1.6274 in 2015 and hitting a low of 1.1263 in 2011. Comparatively, the current ratio has often been slightly below the industry median. For example, in 2023, the industry median Current Ratio stands at 1.5642, indicating that Phillips 66's current ratio underperforms relative to its peers.

Number of shares not diluted?

Change in Shares Outstanding criterion reflects the company's capital management and shareholder value.

Historical outstanding shares of Phillips 66 (PSX)

The Outstanding Shares of Phillips 66 decreased from 471,497,000 in 2022 to 450,136,000 in 2023. This decrease is positive as it indicates share buybacks, a strategy often aimed at increasing shareholder value by reducing the number of shares in circulation. Therefore, Phillips 66 scores 1 point for this criterion. Over the last 20 years, the trend reveals a consistent decrease in the Outstanding Shares, reflecting a deliberate approach to manage share dilution and often indicating strong cash flow utilized for buybacks.

Operating of Phillips 66 (PSX)

Cross Margin is growing?

Gross Margin measures the percentage of revenue that exceeds the cost of goods sold. It is important because it indicates how efficiently a company is producing its goods.

Historical gross margin of Phillips 66 (PSX)

The Gross Margin for Phillips 66 increased from 0.1084 in 2022 to 0.1176 in 2023, demonstrating an improvement in operational efficiency by over 8.5%. Historically, Phillips 66 has had a fluctuating Gross Margin, often outperforming the industry median. Comparing it to the industry's median of 0.0872 in 2023, Phillips 66 is well above the average, reinforcing its competitive efficiency. This trend is good, reflecting healthier financials and better cost management. Thus, we add 1 point for the Gross Margin improvement.

Asset Turnover Ratio is growing?

Asset Turnover is a measure of a company's efficiency in using its assets to generate sales revenue. It is calculated by dividing sales revenue by total assets.

Historical asset turnover ratio of Phillips 66 (PSX)

Comparing the Asset Turnover of 1.9402 in 2023 with 2.5749 in 2022, it is evident that the Asset Turnover has decreased. This significant drop to 1.9402 from 2.5749 indicates that Phillips 66 was less efficient in using its assets to generate revenue in 2023 as compared to the previous year. Over 20 years, the Asset Turnover has experienced fluctuations, reaching its peak at 4.4863 in 2011. This trend is troubling as the company is not maintaining its efficiency, leading to poor asset utilization. Therefore, no point is given for this criterion.


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