Heading into the next trading session, Phillips 66 (PSX) has a Piotroski F-Score of 7. The F-Score may help discover companies with strengthening balance sheets. The score may also be used to spot the weak performers. Joseph Piotroski developed the F-Score which employs nine different variables based on the company financial statement. A single point is assigned to each test that a stock passes. Typically, a stock scoring an 8 or 9 would be seen as strong. On the other end, a stock with a score from 0-2 would be viewed as weak.Investors might be trying to figure out an investment plan that is right for them. Some may opt to go with a short-term plan, and others may choose to invest in stocks for the long haul. The thought of creating a defined plan may be overwhelming to some. Comparing the plusses and minuses of both may be a good way to start forming a strategy. Investing for the short-term may offer chances to capitalize on gains over a few weeks or months. There may be more fluctuations to deal with in the short-term, but the rewards may be greater if managed properly. One drawback of investing for the short-term is that it may involve more risk. The element of correct timing comes into play when trying to enter or exit a position, which may not be for everyone. Investing for the long-term may be a safer way to go as investors are typically looking for smaller gains over a longer period of time.
There are many different tools to determine whether a company is profitable or not. One of the most popular ratios is the “Return on Assets” (aka ROA). This score indicates how profitable a company is relative to its total assets. The Return on Assets for Phillips 66 (PSX) is 0.101185. This number is calculated by dividing net income after tax by the company’s total assets. A company that manages their assets well will have a higher return, while a company that manages their assets poorly will have a lower return.
Return on Invested Capital (ROIC), ROIC Quality, ROIC 5 Year Average
The Return on Invested Capital (aka ROIC) for Phillips 66 (PSX) is 0.168892. The Return on Invested Capital is a ratio that determines whether a company is profitable or not. It tells investors how well a company is turning their capital into profits. The ROIC is calculated by dividing the net operating profit (or EBIT) by the employed capital. The employed capital is calculated by subrating current liabilities from total assets. Similarly, the Return on Invested Capital Quality ratio is a tool in evaluating the quality of a company’s ROIC over the course of five years. The ROIC 5 year average is calculated using the five year average EBIT, five year average (net working capital and net fixed assets). The ROIC 5 year average of Phillips 66 (PSX) is 0.129399.
Robert Novy-Marx, a professor at the university of Rochester, discovered that gross profitability – a quality factor – has as much power predicting stock returns as traditional value metrics. He found that while other quality measures had some predictive power, especially on small caps and in conjunction with value measures, gross profitability generates significant excess returns as a stand alone strategy, especially on large cap stocks.
Market watchers may also be following some quality ratios for Phillips 66 (PSX). Robert Novy-Marx, a professor at the university of Rochester, discovered that gross profitability – a quality factor – has as much power predicting stock returns as traditional value metrics. He found that while other quality measures had some predictive power, especially on small caps and in conjunction with value measures, gross profitability generates significant excess returns as a stand alone strategy, especially on large cap stocks.The Gross profitability for (PSX) is 0.226808.
Earnings to Price (Yield), Earnings Yield, Earnings Yield Five Year
The Earnings to Price yield of Phillips 66 (PSX) is 0.112181. This is calculated by taking the earnings per share and dividing it by the last closing share price. This is one of the most popular methods investors use to evaluate a company’s financial performance. Earnings Yield is calculated by taking the operating income or earnings before interest and taxes (EBIT) and dividing it by the Enterprise Value of the company. The Earnings Yield for Phillips 66 (PSX) is 0.078699. Earnings Yield helps investors measure the return on investment for a given company. Similarly, the Earnings Yield Five Year Average is the five year average operating income or EBIT divided by the current enterprise value. The Earnings Yield Five Year average for Phillips 66 (PSX) is 0.05361.
The MF Rank (aka the Magic Formula) is a formula that pinpoints a valuable company trading at a good price. The formula is calculated by looking at companies that have a high earnings yield as well as a high return on invested capital. The MF Rank of Phillips 66 (PSX) is 1828. A company with a low rank is considered a good company to invest in. The Magic Formula was introduced in a book written by Joel Greenblatt, entitled, “The Little Book that Beats the Market”. The ERP5 Rank is an investment tool that analysts use to discover undervalued companies. The ERP5 looks at the Price to Book ratio, Earnings Yield, ROIC and 5 year average ROIC. The ERP5 of Phillips 66 (PSX) is 2115. The lower the ERP5 rank, the more undervalued a company is thought to be.
Investors are always trying to get an advantage in the equity market. Everyone wants to find that next great stock pick that provides a solid boost to the portfolio. Investors often identify risk preference when trying to sort out asset allocation. In general, a higher amount of risk may offer a greater potential for growth. Many investors may struggle with the concept of leaving emotion out of picking stocks. Equity research may involve a high degree of patience, determination, and lots of homework. Learning everything possible about the markets can help the individual investor better navigate the waters. As the old saying goes, knowledge is power. Being able to filter through the data to determine what is relevant information may assist the investor with making those tough investment decisions.
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