• If you are wondering whether Phillips 66's current share price lines up with its underlying value, this breakdown will help you frame what the market might be pricing in right now.
• The stock last closed at US$165.13, with returns of 3.6% over 7 days, a 12.3% decline over 30 days, 26.5% year to date and 61.5% over 1 year. The 3 year and 5 year returns stand at 93.9% and 141.0% respectively.
• Recent price moves sit against a backdrop of ongoing coverage of Phillips 66 as a large US energy refiner and marketer, with investors watching how it positions itself across refining and midstream operations. Market commentary has also focused on how integrated energy companies manage capital allocation and shareholder returns, and Phillips 66 is often part of that discussion.
• On Simply Wall St's 6 point valuation framework, Phillips 66 scores 3 out of 6. Next, the article will walk through different valuation methods to see what that score might mean and finish by looking at a broader way to think about valuation beyond a single number.

Approach 1: Phillips 66 Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of the cash a company could generate in the future and discounts those amounts back to what they might be worth today. It is essentially a way of asking what a stream of future cash flows could be worth in present dollars.

For Phillips 66, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flows in $. The latest twelve month free cash flow is about $3.01b. Analyst inputs and extrapolated estimates suggest free cash flow of $4.73b by 2028, with further projections out to 2035 supplied by Simply Wall St’s model rather than by analysts directly.

When all of these projected cash flows are discounted back and summed, the model arrives at an estimated intrinsic value of about $177.05 per share, compared with the recent share price of $165.13. That gap implies Phillips 66 is trading at roughly a 6.7% discount to this DCF estimate, which is a relatively small difference and can easily close or widen as assumptions change.

Result: ABOUT RIGHT

Phillips 66 is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: Phillips 66 Price vs Earnings

For a profitable company, the P/E ratio is a straightforward way to link what you pay for the stock to the earnings the business is generating right now. It lets you compare how the market values each dollar of earnings across different companies and sectors.

What counts as a “normal” P/E depends a lot on how the market views a company’s growth prospects and risks. Higher expected growth and lower perceived risk often line up with higher P/E ratios, while slower growth or higher risk usually come with lower multiples.

Phillips 66 currently trades on a P/E of 15.07x. That sits close to the Oil and Gas industry average of 14.90x and below the peer group average of 24.15x. Simply Wall St also calculates a “Fair Ratio” for Phillips 66 of 23.74x, which is an estimate of what the P/E might be given factors such as its earnings profile, industry, profit margin, market cap and risks.

This Fair Ratio can be more informative than a simple comparison with peers or the industry because it adjusts for the company’s own characteristics rather than assuming a one size fits all benchmark. With a Fair Ratio of 23.74x versus the current 15.07x, the multiple based view suggests the stock is undervalued.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Phillips 66 Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so Narratives bring that idea to life by letting you attach a clear story about Phillips 66 to the numbers you care about, like your assumed fair value and expectations for revenue, earnings and margins.

A Narrative on Simply Wall St links three pieces together: your view of the company’s story, a financial forecast that reflects that view, and a fair value estimate that you can then compare to the current share price.

These Narratives sit inside the Community page on Simply Wall St, are easy to use, and are already created and followed by millions of investors who want a quick way to see how a business story translates into numbers.

Because each Narrative has a fair value attached, it can help you decide whether you see Phillips 66 as closer to the more optimistic view, with a fair value around US$213.00, or the more cautious view, around US$138.00, and how that compares to the latest market price.

Narratives also update as new information, like earnings or project news, is reflected in forecasts, so your Phillips 66 story can evolve over time rather than staying locked to a single static estimate.

For Phillips 66 however we will make it really easy for you with previews of two leading Phillips 66 Narratives:

Fair value: US$268.71 per share

Implied discount to this narrative: about 38.6% relative to the recent US$165.13 share price

Revenue growth assumption: 3%

• Frames Phillips 66 as undervalued, with the view that its integrated refining, marketing and transportation footprint can support higher profit margins over time.
• Highlights factors such as industry position, cost efficiency efforts, growth projects and capital returns as reasons some investors see more value than the current share price implies.
• Assumes that continued focus on efficiency, growth initiatives and balance sheet strength could support higher profitability if external conditions are managed well.

Fair value: US$138.00 per share

Implied premium to this narrative: about 19.7% relative to the recent US$165.13 share price

Revenue growth assumption: 1.41% decline per year over the next 3 years

• Argues that execution risks around cost targets, heavy crude exposure, large capital projects and petrochemical capacity additions could limit long term earnings power.
• Builds in assumptions of modest revenue contraction, moderate margin improvement and a lower future P/E multiple of 10.8x. Together these inputs point to a lower fair value than the current price.
• Emphasizes that while analysts still model higher earnings by 2029, this view sees current market expectations as too optimistic relative to the risks and required execution.

Seeing both narratives side by side can help you decide whether your own expectations for Phillips 66 sit closer to the more optimistic or the more cautious camp, and how that stacks up against the latest market price. See what the community is saying about Phillips 66

Do you think there's more to the story for Phillips 66? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.