Stock Analysis

Does Philip Morris International (NYSE:PM) Deserve A Spot On Your Watchlist?

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NYSE:PM
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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Philip Morris International (NYSE:PM). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Philip Morris International

How Quickly Is Philip Morris International Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Over the last three years, Philip Morris International has grown EPS by 11% per year. That's a good rate of growth, if it can be sustained.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that Philip Morris International is growing revenues, and EBIT margins improved by 4.3 percentage points to 43%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
NYSE:PM Earnings and Revenue History September 5th 2021

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Philip Morris International?

Are Philip Morris International Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$165b company like Philip Morris International. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$287m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Is Philip Morris International Worth Keeping An Eye On?

As I already mentioned, Philip Morris International is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. You should always think about risks though. Case in point, we've spotted 2 warning signs for Philip Morris International you should be aware of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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