Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In contrast to all that, I prefer to spend time on companies like Philip Morris International (NYSE:PM), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Philip Morris International's Earnings Per Share Are Growing.
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Philip Morris International managed to grow EPS by 10% per year, over three years. That's a good rate of growth, if it can be sustained.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Philip Morris International shareholders can take confidence from the fact that EBIT margins are up from 40% to 43%, and revenue is growing. 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. To see the actual numbers, click on the chart.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Philip Morris International's forecast profits?
Are Philip Morris International Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$148b company like Philip Morris International. But we are reassured by the fact they have invested in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$249m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
Is Philip Morris International Worth Keeping An Eye On?
One positive for Philip Morris International is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Before you take the next step you should know about the 1 warning sign for Philip Morris International that we have uncovered.
Although Philip Morris International certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
What are the risks and opportunities for Philip Morris International?
Trading at 32.7% below our estimate of its fair value
Earnings are forecast to grow 6.59% per year
Has a high level of debt
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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.
Philip Morris International
Philip Morris International Inc. operates as a tobacco company working to delivers a smoke-free future and evolving portfolio for the long-term to include products outside of the tobacco and nicotine sector.
6 star dividend payer and fair value.