Stock Analysis

At US$103, Is Philip Morris International Inc. (NYSE:PM) Worth Looking At Closely?

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NYSE:PM
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Today we're going to take a look at the well-established Philip Morris International Inc. (NYSE:PM). The company's stock had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of US$94.93 to US$103. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Philip Morris International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Philip Morris International

What is Philip Morris International worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Philip Morris International’s ratio of 18.04x is trading slightly above its industry peers’ ratio of 13.35x, which means if you buy Philip Morris International today, you’d be paying a relatively sensible price for it. And if you believe that Philip Morris International should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Philip Morris International’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Philip Morris International?

earnings-and-revenue-growth
NYSE:PM Earnings and Revenue Growth August 18th 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Philip Morris International's earnings over the next few years are expected to increase by 29%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in PM’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at PM? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on PM, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for PM, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Philip Morris International as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Philip Morris International you should be aware of.

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