Is Now the Right Moment for Philip Morris After Strong 42% Year-to-Date Rally?

If you are sizing up your next move with Philip Morris International stock, you are not alone. Investors are watching closely as PM’s price journeys through a mix of steady returns and headline-driven bumps. Over the past year, PM has powered higher by nearly 50%, handily outpacing broader market indices and sparking conversation about whether this momentum can last. Looking at shorter timeframes, the story gets a bit more nuanced. PM is up around 2% this week, while the last month was slightly negative. The stock’s year-to-date gain stands tall at over 42%, underlining a shift in sentiment. This may reflect changing risk perceptions or optimism about the company’s revenue growth, which came in at about 7.6% over the past year.

But with all this movement, is Philip Morris actually undervalued, or is the market pricing in all that potential? According to our valuation checklist, PM earns a score of 1 out of 6. This is a quick signal that, based only on traditional undervaluation checks, this is not a clear bargain. Still, raw numbers rarely tell the full story, especially for a global tobacco leader navigating regulatory pressures and shifting consumer trends.

Let us pull back the curtain on the valuation methods behind that score. We will break down where PM stands and what matters most. Additionally, read on to the end for a smarter approach to valuation that you will not want to miss.

Philip Morris International delivered 49.7% returns over the last year. See how this stacks up to the rest of the Tobacco industry.

Approach 1: Philip Morris International Cash Flows

The Discounted Cash Flow (DCF) model helps estimate a stock’s intrinsic value by calculating all the cash a company is expected to generate in the future and then discounting those amounts back to their present value. This approach focuses on the actual money the business produces rather than just accounting profits.

For Philip Morris International, the latest twelve months of Free Cash Flow stands at approximately $8.92 billion. Analysts forecast steady growth, projecting free cash flow to rise to around $19.18 billion by 2035. These forecasts rely on multiple analyst sources and apply gradually increasing growth rates over the decade.

Based on this detailed DCF process, the estimated fair value of Philip Morris International shares is $207.78. This is about 16.8% higher than the current share price, suggesting the stock is considered 16.8% undervalued according to this model. In summary, the market may not be fully reflecting the company’s expected long-term cash-generating strength.

Result: UNDERVALUED

Our DCF analysis suggests Philip Morris International is undervalued by 16.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: Philip Morris International Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation tool for established, profitable companies like Philip Morris International because it links a company’s market price directly to its actual earnings. Using the PE ratio, investors can quickly compare how much they are paying for every dollar of profit the company generates and measure it against similar businesses.

What counts as a “fair” PE ratio depends on several factors. High expected earnings growth or a strong market position can justify a higher ratio, while greater risk or slower growth typically means a lower one is warranted. The PE ratio should also be viewed in context against industry peers and the wider stock market.

Currently, Philip Morris International trades at a PE of 32.78x. This is much higher than the tobacco industry average of 12.33x and the peer group’s average of 24.90x, reflecting the company’s premium status and perhaps higher future growth expectations. Simply Wall St’s proprietary Fair Ratio for PM stands at 31.01x, accounting for PM’s profitability, industry position, and specific risks.

Comparing the Fair Ratio (31.01x) with the actual PE (32.78x) suggests the stock is currently priced a bit above what our fair value model indicates, but the difference is not extreme.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Philip Morris International Narrative

Beyond crunching traditional valuation ratios, many investors rely on a Narrative: a clear, reasoned story that ties together what you believe about a company with where you think its numbers are headed, and what that means for a fair price.

A Narrative connects your perspective on Philip Morris International, such as its ability to navigate regulations, launch new products, or tap into new markets, to estimates of future revenue, earnings, and margins, and ultimately to an assessed fair value for the stock.

On the Simply Wall St platform, Narratives make this personalized analysis easy and accessible by offering a space where millions of investors put their views into action and compare live market prices to their own fair value to decide when to buy, hold, or sell.

The power of Narratives is that they update automatically whenever new information or breaking news arrives, ensuring that your view of the company stays relevant in real time as facts change.

For example, some investors see regulatory headwinds and muted growth and value Philip Morris International as low as $153 per share, while others focus on rapid smoke-free expansion and set fair value at $220. This demonstrates how your Narrative brings the numbers to life and helps you make more confident decisions.

For Philip Morris International, we’ll make it really easy for you with previews of two leading Philip Morris International Narratives:

🐂 Philip Morris International Bull Case

Fair Value: $220.00
Undervalued by: 21%
Forecast Revenue Growth: 10.7%

• There is an optimistic outlook on sustained growth from ZYN and smoke-free products, particularly through emerging market expansion and urbanization. This may unlock higher market share and revenues.
• Diversification into wellness, healthcare, and digital platforms is expected to create new high-margin revenue streams and strengthen long-term profitability.
• Risks include regulatory headwinds, declining cigarette volumes, illicit trade, and ESG pressures. However, PMI’s global footprint and strong balance sheet are seen as clear advantages.

🐻 Philip Morris International Bear Case

Fair Value: $153.00
Overvalued by: 13%
Forecast Revenue Growth: 6.4%

• This view highlights intensifying regulatory risks, public health campaigns, and ESG-driven investor divestment as threats to future revenue and operating margins.
• It emphasizes that slow growth in next-generation products and persistent declines in traditional segments may result in margin pressure and muted earnings growth.
• There is also a warning that rising compliance costs and rapid R&D spending could outpace gains from new products. This could potentially lead to long-term underperformance if adoption disappoints.

Do you think there's more to the story for Philip Morris International? Create your own Narrative to let the Community know!

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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