Phillips 66’s (NYSE:PSX) Stock Has Shown A Decent Performance: Have Financials A Role To Play?

Phillips 66’s (NYSE:PSX) stock is up by 6.0% over the past three months. Given that stock prices are usually aligned with a company’s financial performance in the long-term, we decided to investigate if the company’s decent financials had a hand to play in the recent price move. Particularly, we will be paying attention to Phillips 66’s ROE today.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In simpler terms, it measures the profitability of a company in relation to shareholder’s equity.

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ROE can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for Phillips 66 is:

6.4% = US$1.8b ÷ US$29b (Based on the trailing twelve months to June 2025).

The ‘return’ is the yearly profit. One way to conceptualize this is that for each $1 of shareholders’ capital it has, the company made $0.06 in profit.

View our latest analysis for Phillips 66

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Depending on how much of these profits the company reinvests or “retains”, and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don’t have the same features.

At first glance, Phillips 66’s ROE doesn’t look very promising. Next, when compared to the average industry ROE of 11%, the company’s ROE leaves us feeling even less enthusiastic. However, we we’re pleasantly surprised to see that Phillips 66 grew its net income at a significant rate of 30% in the last five years. Therefore, there could be other reasons behind this growth. For example, it is possible that the company’s management has made some good strategic decisions, or that the company has a low payout ratio.

We then performed a comparison between Phillips 66’s net income growth with the industry, which revealed that the company’s growth is similar to the average industry growth of 31% in the same 5-year period.