Phillips 66 operates as an energy manufacturing and logistics company. It operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties. The company was founded in 1875 and is based in Houston, Texas.
PSX Price Forecast Based on DCF Valuation
DCF Fair Value Target:
We started the process of determining a valid price forecast for Phillips 66 with a discounted cash flow analysis -- the results of which can be found in the table below. To summarize, we found that Phillips 66 ranked in the 22th percentile in terms of potential gain offered. We should note, though, that all scenearios modelled for this stock suggest it is overvalued. The most interesting components of our discounted cash flow analysis for Phillips 66 ended up being:
Its compound free cash flow growth rate, as measured over the past 5.76 years, is -0.08% -- higher than merely 18.5% of stocks in our DCF forecasting set.
Phillips 66's weighted average cost of capital (WACC) is 7%; for context, that number is higher than only 20.31% of tickers in our DCF set.
Relative to other stocks in its sector (Energy), Phillips 66 has a reliance on debt greater than only 17.33% of them.
Terminal Growth Rate in Free Cash Flow
Return Relative to Current Share Price
NS, PBA, SLB, FTI, and PEIX can be thought of as valuation peers to PSX, in the sense that they are in the Energy sector and have a similar price forecast based on DCF valuation.
Shares of Phillips 66 (NYSE: PSX) have been quite volatile this year. The refining company's stock tumbled more than 60% at one point because of the impact the COVID-19 outbreak had on demand for refined products like gasoline and jet fuel. Phillips 66 has a long history of creating value for investors.