Is There Now an Opportunity in Altria After 15% Price Drop and Regulatory Headlines?

• If you have ever wondered whether Altria Group’s share price tells the whole story, you are not alone. There is more beneath the surface than just headline numbers.
• Despite gaining 7.4% year-to-date and 12.3% over the past year, Altria’s stock dipped sharply in the past month, sliding nearly 15%. This has raised both eyebrows and questions about growth and risk.
• Since early May, Altria's price has been influenced by market speculation about regulatory developments and renewed debates over the future of tobacco alternatives. Proposed flavor bans have made headlines and fueled volatility. Meanwhile, investors are watching closely as the company focuses on its strategic investments in smoke-free products and partnerships.
• Altria earns a 5 out of 6 score on our value checks, suggesting solid undervaluation by most measures. Next, we will break down what those valuation models actually mean, followed by an even better approach to finding Altria’s true value.

Find out why Altria Group's 12.3% return over the last year is lagging behind its peers.

Approach 1: Altria Group Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is one of the most widely used methods for valuing companies. It estimates a business’s intrinsic worth by projecting its future cash flows and discounting them back to the present day. This approach provides a forward-looking snapshot of what Altria Group could be worth based on its ability to generate cash well into the future.

For Altria Group, the current free cash flow sits at $9.17 billion, a robust figure considering the environment. Analysts project these cash flows will steadily grow over the next decade, with five-year forecasts from analysts and subsequent years extrapolated by Simply Wall St. By 2029, projected free cash flow is expected to reach nearly $10 billion, and by 2035 these flows could rise to around $11.47 billion according to the model’s extrapolations.

After running these numbers through a DCF calculation, the estimated intrinsic value per share for Altria comes out to $110.69. This represents an implied discount of 49.1% to the current share price, indicating the market is significantly undervaluing Altria based on its cash flow potential.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Altria Group is undervalued by 49.1%. Track this in your watchlist or portfolio, or discover 831 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Altria Group.

Approach 2: Altria Group Price vs Earnings

The Price-to-Earnings (PE) ratio is one of the most popular and relevant valuation tools for profitable companies like Altria Group. Since PE directly links a company's share price to its earnings, it helps investors assess how much they are paying for current and anticipated profits. Companies with consistent profitability and relatively predictable earnings, such as Altria, are ideal candidates for using this multiple.

The "right" PE ratio for a given company is not set in stone. Growth expectations and perceived risks play a pivotal role in what investors are willing to pay. Firms with robust growth prospects or lower risk profiles typically command higher PE ratios, while slower-growing or riskier businesses often trade at lower multiples.

Looking at Altria Group specifically, the stock trades at a PE ratio of 10.68x. This sits below the tobacco industry average of 14.58x and well under the peer average of 20.54x. However, absolute comparisons can be misleading because each company's circumstances are unique. That is where the Simply Wall St "Fair Ratio" comes in. Calculated at 19.71x for Altria, this proprietary metric factors in not just industry norms, but also the company’s earnings growth, profit margins, size, and risks. It offers a more holistic benchmark than traditional peer or industry averages, reflecting a fairer value multiple Altria should attract in the market.

When putting Altria’s current PE ratio of 10.68x beside its Fair Ratio of 19.71x, there is a substantial discount suggesting the stock is currently undervalued against its expected long-term earning power.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1410 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Altria Group Narrative

Earlier, we mentioned there is an even better way to understand valuation. Let’s introduce you to Narratives. Narratives are simple, story-driven perspectives that connect the dots between your outlook on a company’s future and its estimated fair value. In essence, a Narrative lets you express the story behind the numbers by setting your own assumptions for Altria’s future revenue, earnings, and margins. This turns complex forecasts into a clear, shareable investment thesis.

With Simply Wall St’s Narratives, available on the Community page used by millions of investors, anyone can quickly link their perspective on Altria Group to a financial forecast and a resulting fair value. Narratives allow you to decide if it is time to buy, hold, or sell by comparing your calculated Fair Value to the current share price, all in an easy and accessible format.

These Narratives update dynamically when new news, quarterly results, or company announcements are released, ensuring your thesis stays relevant. For example, some investors see Altria’s stable dividends and operational focus supporting a bullish fair value of $73 per share, while others cite regulatory and market risks for a more cautious value close to $49. Narratives help you personalize your view and make smarter, story-driven investment decisions.

Do you think there's more to the story for Altria Group? 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.

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