Philip Morris International Inc (PM)

Conclusion

Philip Morris International sells cigarettes alongside smoke-free products under the IQOS, VEEV and ZYN brands. At 193.12 USD on 9 November 2026, the market capitalisation is 301.0 billion USD.

The verdict is fair. Today's P/E of 28.1 compares with a ten-year median of 20.9, a premium of 34.6%, and EV/EBITDA of 18.2 compares with a median of 14.8, a premium of 22.9%. The DCF gives 183.16 USD per share at a discount rate of 8.87%, while the fair value from historical multiples is 145.61 USD. The fair value band runs from 131.51 to 197.27 USD with a midpoint of 164.39 USD, a margin of safety of -14.9% at the current price. The reverse DCF implies growth of 6.7% a year, against revenue growth of 7.2% a year over five years and free cash flow per share growth of 3.0% a year.

What holds the case up is the return on capital: ROIC of 42.4% against a WACC of 8.2%, and free cash flow conversion of 127% on a trailing basis. The Piotroski score of 7 out of 9 supports this. What would break it is leverage and the price itself. Net debt to EBITDA is 2.18, the quick ratio is 0.52, and the price already embeds a premium to every historical multiple. Estimate revisions for next year have been negative, with 10 downgrades against 2 upgrades in the last 30 days.

Financial health

Financial strength is green, held up by the Altman Z-score of 4.77 and interest coverage of 11.3, and held back only by neutral readings on leverage and liquidity. Net debt to EBITDA is 2.18 and the current ratio is 1.02, while the quick ratio of 0.52 shows that short-term obligations depend on inventory. Debt to equity is not available because the company has negative equity, so the usual leverage ratio carries little meaning here. The Altman Z-score of 4.77 places the company in the safe zone. Insolvency risk: low, about 1.2% by the estimate of the Ohlson model over one to two years. The estimate is based on year-end 2025 figures.

Earnings quality

Earnings quality is green. Free cash flow conversion is 127% on a trailing basis and 134% on average over five years, and the accrual ratio of -1.35% shows that reported earnings are backed by cash. Free cash flow after stock-based compensation is 13.6 billion USD on a trailing basis. Stock-based compensation to revenue is not available. The share count has not changed over five years, so there is no dilution. The Piotroski score is 7 of 9 and the Beneish M-score of -2.353 is in the unlikely manipulation range. The company beat estimates in 7 of the last 8 quarters, with an average surprise of 4.4%. Estimate revisions are the weak point: over 90 days the current-year estimate changed by -0.6% and the next-year estimate by -1.3%.

Profitability

Profitability is green, with ROIC of 42.4% against a WACC of 8.2%, a difference of 34.2 percentage points as given. The five-year median ROIC is 32.5%. The gross margin of 67.7% compares with a median of 64.4%, and the operating margin of 38.6% compares with a median of 37.5%. The net margin of 24.8% sits slightly under its median of 25.1%. Return on equity is not available because equity is negative. The DuPont split for year-end 2025 shows a net margin of 27.9% and an asset turnover of 0.59, so returns come from margins rather than from leverage.

Growth

Growth is green, though most of its readings are neutral. Revenue compounds at 8.6% over three years, 7.2% over five years and 4.3% over ten years. EPS grows at 7.7%, 7.1% and 5.1% over the same periods. Free cash flow per share grows more slowly, at 3.0% over three and five years and 4.4% over ten. Revenue rose in 8 of the 10 comparable years. The consensus next-year EPS growth estimate is 8.2%, which is a positive reading even though estimates were revised down over the last 90 days.

Valuation

Valuation is yellow, because every current multiple stands above its own ten-year median: P/E 28.1 against 20.9, EV/EBITDA 18.2 against 14.8, price to free cash flow 22.1 against 16.9, and price to sales 7.0 against 5.1. The DCF gives 183.16 USD per share at a discount rate of 8.87%, with 57.4% of its value in the terminal period. The fair value from historical multiples is 145.61 USD. The fair value band of 131.51 to 197.27 USD is an order-of-magnitude estimate built on fixed assumptions, including a 5% equity risk premium and capped growth. It is not a price target. The reverse DCF implies 6.7% growth. The dividend yield is 3.1%, the forward yield is 3.2%, and the payout on free cash flow is 67.7%.

Risks

A rise in leverage would matter most. A net debt to EBITDA of 2.18 leaves less room if cash flow weakens, and a quick ratio of 0.52 means short-term liquidity relies on current trading. The premium multiples leave little margin for error: if growth slows toward the 3.0% a year delivered by free cash flow per share, the current price is harder to justify. Negative estimate revisions point the same way. Stock-based compensation to revenue, return on equity and the price-to-book ratio are not available. This analysis has no debt maturity schedule and no revenue breakdown by segment, so it cannot show when debt falls due or which product lines drive growth.