Investors Interested In Philip Morris International Inc.'s (NYSE:PM) Earnings

With a median price-to-earnings (or "P/E") ratio of close to 19x in the United States, you could be forgiven for feeling indifferent about Philip Morris International Inc.'s (NYSE:PM) P/E ratio of 20.1x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

With earnings growth that's superior to most other companies of late, Philip Morris International has been doing relatively well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Philip Morris International

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Philip Morris International.

Does Growth Match The P/E?

There's an inherent assumption that a company should be matching the market for P/E ratios like Philip Morris International's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 23%. EPS has also lifted 9.6% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Turning to the outlook, the next three years should generate growth of 9.8% per annum as estimated by the eleven analysts watching the company. That's shaping up to be similar to the 11% per year growth forecast for the broader market.

In light of this, it's understandable that Philip Morris International's P/E sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Philip Morris International's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

Before you settle on your opinion, we've discovered 2 warning signs for Philip Morris International that you should be aware of.

Of course, you might also be able to find a better stock than Philip Morris International. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.