Trade-Ideas: Phillips 66 (PSX) Is Today's

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Phillips 66 ( PSX) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Phillips 66 as such a stock due to the following factors:

  • PSX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $232.4 million.
  • PSX has traded 3.3 million shares today.
  • PSX is trading at 1.76 times the normal volume for the stock at this time of day.
  • PSX crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on PSX:

Phillips 66 operates as an independent downstream energy company. The company operates in three segments: Refining and Marketing (R&M), Midstream, and Chemicals. The stock currently has a dividend yield of 2.2%. PSX has a PE ratio of 7.8. Currently there are 7 analysts that rate Phillips 66 a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Phillips 66 has been 3.8 million shares per day over the past 30 days. Phillips 66 has a market cap of $35.3 billion and is part of the basic materials sector and energy industry. Shares are up 8.8% year to date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Phillips 66 as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, PSX's share price has jumped by 29.72%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • PSX's debt-to-equity ratio is very low at 0.30 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.00, which illustrates the ability to avoid short-term cash problems.
  • PSX, with its decline in revenue, slightly underperformed the industry average of 6.6%. Since the same quarter one year prior, revenues slightly dropped by 8.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for PHILLIPS 66 is currently extremely low, coming in at 3.59%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.40% trails that of the industry average.
  • Net operating cash flow has decreased to $968.00 million or 32.49% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.
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