Intrinsic value of Philip Morris International - PM

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$110.84

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$110.84

 
Intrinsic value

$22.44

 
Up/down potential

-80%

 
Rating

str. sell

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PM stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 171.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -0.41
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
  5.62
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
  5.24
  5.21
  5.19
Revenue, $m
  26,685
  29,113
  31,643
  34,276
  37,015
  39,861
  42,819
  45,893
  49,088
  52,408
  55,861
  59,453
  63,191
  67,082
  71,135
  75,359
  79,763
  84,357
  89,152
  94,158
  99,388
  104,852
  110,565
  116,540
  122,790
  129,332
  136,179
  143,349
  150,858
  158,724
  166,967
Variable operating expenses, $m
 
  17,518
  18,976
  20,495
  22,073
  23,714
  25,420
  27,192
  29,034
  30,949
  32,939
  34,278
  36,433
  38,676
  41,013
  43,449
  45,988
  48,636
  51,401
  54,287
  57,302
  60,453
  63,747
  67,192
  70,795
  74,567
  78,514
  82,648
  86,978
  91,513
  96,265
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  15,870
  17,518
  18,976
  20,495
  22,073
  23,714
  25,420
  27,192
  29,034
  30,949
  32,939
  34,278
  36,433
  38,676
  41,013
  43,449
  45,988
  48,636
  51,401
  54,287
  57,302
  60,453
  63,747
  67,192
  70,795
  74,567
  78,514
  82,648
  86,978
  91,513
  96,265
Operating income, $m
  10,815
  11,596
  12,667
  13,782
  14,941
  16,147
  17,399
  18,701
  20,054
  21,460
  22,922
  25,175
  26,758
  28,406
  30,122
  31,910
  33,775
  35,721
  37,751
  39,871
  42,085
  44,399
  46,818
  49,348
  51,995
  54,765
  57,664
  60,700
  63,880
  67,211
  70,702
EBITDA, $m
  11,558
  12,760
  13,869
  15,023
  16,223
  17,470
  18,767
  20,114
  21,514
  22,970
  24,483
  26,057
  27,695
  29,401
  31,177
  33,028
  34,959
  36,972
  39,074
  41,268
  43,560
  45,955
  48,459
  51,077
  53,817
  56,684
  59,685
  62,827
  66,118
  69,566
  73,179
Interest expense (income), $m
  1,052
  956
  428
  531
  638
  749
  865
  986
  1,111
  1,241
  1,376
  1,517
  1,663
  1,815
  1,973
  2,138
  2,310
  2,490
  2,677
  2,872
  3,076
  3,289
  3,511
  3,744
  3,987
  4,241
  4,508
  4,786
  5,078
  5,384
  5,704
Earnings before tax, $m
  9,924
  10,639
  12,239
  13,251
  14,303
  15,397
  16,534
  17,715
  18,943
  20,219
  21,546
  23,659
  25,095
  26,591
  28,148
  29,772
  31,465
  33,231
  35,074
  36,999
  39,010
  41,111
  43,307
  45,605
  48,008
  50,524
  53,157
  55,914
  58,802
  61,827
  64,997
Tax expense, $m
  2,768
  2,873
  3,305
  3,578
  3,862
  4,157
  4,464
  4,783
  5,115
  5,459
  5,817
  6,388
  6,776
  7,179
  7,600
  8,038
  8,496
  8,972
  9,470
  9,990
  10,533
  11,100
  11,693
  12,313
  12,962
  13,641
  14,352
  15,097
  15,877
  16,693
  17,549
Net income, $m
  6,967
  7,767
  8,935
  9,673
  10,441
  11,240
  12,070
  12,932
  13,828
  14,760
  15,728
  17,271
  18,319
  19,411
  20,548
  21,734
  22,969
  24,259
  25,604
  27,009
  28,477
  30,011
  31,614
  33,292
  35,046
  36,882
  38,805
  40,817
  42,925
  45,134
  47,448

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,239
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  36,851
  35,591
  38,684
  41,903
  45,250
  48,730
  52,346
  56,104
  60,009
  64,069
  68,290
  72,681
  77,250
  82,007
  86,962
  92,126
  97,510
  103,126
  108,988
  115,108
  121,501
  128,181
  135,165
  142,469
  150,111
  158,107
  166,478
  175,243
  184,423
  194,039
  204,116
Adjusted assets (=assets-cash), $m
  32,612
  35,591
  38,684
  41,903
  45,250
  48,730
  52,346
  56,104
  60,009
  64,069
  68,290
  72,681
  77,250
  82,007
  86,962
  92,126
  97,510
  103,126
  108,988
  115,108
  121,501
  128,181
  135,165
  142,469
  150,111
  158,107
  166,478
  175,243
  184,423
  194,039
  204,116
Revenue / Adjusted assets
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
  0.818
Average production assets, $m
  8,439
  9,200
  9,999
  10,831
  11,697
  12,596
  13,531
  14,502
  15,512
  16,561
  17,652
  18,787
  19,968
  21,198
  22,479
  23,813
  25,205
  26,657
  28,172
  29,754
  31,406
  33,133
  34,939
  36,827
  38,802
  40,869
  43,033
  45,298
  47,671
  50,157
  52,762
Working capital, $m
  1,141
  116
  127
  137
  148
  159
  171
  184
  196
  210
  223
  238
  253
  268
  285
  301
  319
  337
  357
  377
  398
  419
  442
  466
  491
  517
  545
  573
  603
  635
  668
Total debt, $m
  29,067
  11,560
  14,343
  17,240
  20,253
  23,385
  26,640
  30,022
  33,536
  37,190
  40,989
  44,941
  49,053
  53,334
  57,794
  62,441
  67,287
  72,342
  77,617
  83,125
  88,879
  94,891
  101,177
  107,750
  114,628
  121,824
  129,358
  137,246
  145,508
  154,164
  163,233
Total liabilities, $m
  49,539
  32,032
  34,815
  37,712
  40,725
  43,857
  47,112
  50,494
  54,008
  57,662
  61,461
  65,413
  69,525
  73,806
  78,266
  82,913
  87,759
  92,814
  98,089
  103,597
  109,351
  115,363
  121,649
  128,222
  135,100
  142,296
  149,830
  157,718
  165,980
  174,636
  183,705
Total equity, $m
  -12,688
  3,559
  3,868
  4,190
  4,525
  4,873
  5,235
  5,610
  6,001
  6,407
  6,829
  7,268
  7,725
  8,201
  8,696
  9,213
  9,751
  10,313
  10,899
  11,511
  12,150
  12,818
  13,517
  14,247
  15,011
  15,811
  16,648
  17,524
  18,442
  19,404
  20,412
Total liabilities and equity, $m
  36,851
  35,591
  38,683
  41,902
  45,250
  48,730
  52,347
  56,104
  60,009
  64,069
  68,290
  72,681
  77,250
  82,007
  86,962
  92,126
  97,510
  103,127
  108,988
  115,108
  121,501
  128,181
  135,166
  142,469
  150,111
  158,107
  166,478
  175,242
  184,422
  194,040
  204,117
Debt-to-equity ratio
  -2.291
  3.250
  3.710
  4.110
  4.480
  4.800
  5.090
  5.350
  5.590
  5.800
  6.000
  6.180
  6.350
  6.500
  6.650
  6.780
  6.900
  7.010
  7.120
  7.220
  7.320
  7.400
  7.490
  7.560
  7.640
  7.710
  7.770
  7.830
  7.890
  7.940
  8.000
Adjusted equity ratio
  -0.499
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6,967
  7,767
  8,935
  9,673
  10,441
  11,240
  12,070
  12,932
  13,828
  14,760
  15,728
  17,271
  18,319
  19,411
  20,548
  21,734
  22,969
  24,259
  25,604
  27,009
  28,477
  30,011
  31,614
  33,292
  35,046
  36,882
  38,805
  40,817
  42,925
  45,134
  47,448
Depreciation, amort., depletion, $m
  743
  1,164
  1,202
  1,241
  1,282
  1,324
  1,368
  1,413
  1,461
  1,510
  1,561
  882
  937
  995
  1,055
  1,118
  1,183
  1,251
  1,323
  1,397
  1,474
  1,556
  1,640
  1,729
  1,822
  1,919
  2,020
  2,127
  2,238
  2,355
  2,477
Funds from operations, $m
  8,010
  8,931
  10,136
  10,914
  11,723
  12,564
  13,437
  14,345
  15,289
  16,270
  17,290
  18,153
  19,257
  20,406
  21,604
  22,852
  24,153
  25,510
  26,927
  28,406
  29,952
  31,566
  33,255
  35,021
  36,868
  38,801
  40,825
  42,944
  45,164
  47,489
  49,925
Change in working capital, $m
  -67
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
Cash from operations, $m
  8,077
  9,016
  10,126
  10,904
  11,712
  12,552
  13,426
  14,333
  15,276
  16,256
  17,276
  18,138
  19,242
  20,391
  21,588
  22,835
  24,135
  25,492
  26,908
  28,386
  29,931
  31,545
  33,232
  34,997
  36,843
  38,775
  40,797
  42,915
  45,133
  47,457
  49,892
Maintenance CAPEX, $m
  0
  -396
  -432
  -469
  -509
  -549
  -591
  -635
  -681
  -728
  -778
  -829
  -882
  -937
  -995
  -1,055
  -1,118
  -1,183
  -1,251
  -1,323
  -1,397
  -1,474
  -1,556
  -1,640
  -1,729
  -1,822
  -1,919
  -2,020
  -2,127
  -2,238
  -2,355
New CAPEX, $m
  -1,172
  -761
  -799
  -832
  -865
  -899
  -935
  -971
  -1,010
  -1,049
  -1,091
  -1,135
  -1,181
  -1,230
  -1,281
  -1,335
  -1,392
  -1,452
  -1,515
  -1,582
  -1,652
  -1,727
  -1,805
  -1,888
  -1,975
  -2,067
  -2,164
  -2,266
  -2,373
  -2,486
  -2,605
Cash from investing activities, $m
  -968
  -1,157
  -1,231
  -1,301
  -1,374
  -1,448
  -1,526
  -1,606
  -1,691
  -1,777
  -1,869
  -1,964
  -2,063
  -2,167
  -2,276
  -2,390
  -2,510
  -2,635
  -2,766
  -2,905
  -3,049
  -3,201
  -3,361
  -3,528
  -3,704
  -3,889
  -4,083
  -4,286
  -4,500
  -4,724
  -4,960
Free cash flow, $m
  7,109
  7,859
  8,895
  9,602
  10,338
  11,104
  11,899
  12,726
  13,586
  14,479
  15,407
  16,175
  17,179
  18,224
  19,312
  20,445
  21,626
  22,857
  24,141
  25,482
  26,881
  28,343
  29,871
  31,468
  33,139
  34,886
  36,715
  38,629
  40,634
  42,733
  44,933
Issuance/(repayment) of debt, $m
  1,131
  -14,291
  2,784
  2,897
  3,013
  3,132
  3,255
  3,382
  3,515
  3,654
  3,799
  3,952
  4,112
  4,281
  4,460
  4,647
  4,846
  5,055
  5,275
  5,508
  5,754
  6,013
  6,286
  6,574
  6,877
  7,197
  7,534
  7,888
  8,262
  8,655
  9,069
Issuance/(repurchase) of shares, $m
  0
  22,679
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  965
  8,388
  2,784
  2,897
  3,013
  3,132
  3,255
  3,382
  3,515
  3,654
  3,799
  3,952
  4,112
  4,281
  4,460
  4,647
  4,846
  5,055
  5,275
  5,508
  5,754
  6,013
  6,286
  6,574
  6,877
  7,197
  7,534
  7,888
  8,262
  8,655
  9,069
Total cash flow (excl. dividends), $m
  7,200
  -6,432
  11,678
  12,499
  13,351
  14,236
  15,154
  16,109
  17,101
  18,132
  19,206
  20,126
  21,291
  22,505
  23,771
  25,092
  26,471
  27,911
  29,416
  30,990
  32,635
  34,356
  36,157
  38,042
  40,016
  42,083
  44,249
  46,518
  48,896
  51,389
  54,002
Retained Cash Flow (-), $m
  -556
  -17,270
  -309
  -322
  -335
  -348
  -362
  -376
  -391
  -406
  -422
  -439
  -457
  -476
  -496
  -516
  -538
  -562
  -586
  -612
  -639
  -668
  -698
  -730
  -764
  -800
  -837
  -876
  -918
  -962
  -1,008
Prev. year cash balance distribution, $m
 
  1,023
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  0
  11,369
  12,177
  13,016
  13,888
  14,792
  15,733
  16,710
  17,727
  18,784
  19,687
  20,834
  22,029
  23,276
  24,576
  25,933
  27,350
  28,830
  30,378
  31,996
  33,688
  35,458
  37,312
  39,252
  41,283
  43,412
  45,641
  47,978
  50,427
  52,994
Discount rate, %
 
  11.70
  12.29
  12.90
  13.54
  14.22
  14.93
  15.68
  16.46
  17.29
  18.15
  19.06
  20.01
  21.01
  22.06
  23.17
  24.32
  25.54
  26.82
  28.16
  29.57
  31.04
  32.60
  34.23
  35.94
  37.73
  39.62
  41.60
  43.68
  45.87
  48.16
PV of cash for distribution, $m
 
  0
  9,017
  8,462
  7,831
  7,143
  6,418
  5,676
  4,937
  4,221
  3,544
  2,890
  2,334
  1,846
  1,428
  1,079
  796
  572
  401
  273
  180
  115
  71
  43
  25
  14
  7
  4
  2
  1
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Philip Morris International Inc., through its subsidiaries, manufactures and sells cigarettes, other tobacco products, and other nicotine-containing products. Its portfolio of brands comprises Marlboro, Merit, Parliament, Virginia S., L&M, Philip Morris, Bond Street, Chesterfield, Lark, Muratti, Next, and Red & White. The company also owns various cigarette brands, such as Dji Sam Soe, Sampoerna, and U Mild in Indonesia; Champion, Fortune, and Jackpot in the Philippines; Apollo-Soyuz and Optima in Russia; Morven Gold in Pakistan; Boston in Colombia; Belmont, Canadian Classics, and Number 7 in Canada; f6 in Germany; Delicados in Mexico; Assos in Greece; and Petra in the Czech Republic and Slovakia. It markets and sells its products in the European Union, Eastern Europe, the Middle East, Africa, Asia, Latin America, and Canada. Philip Morris International Inc. was incorporated in 1987 and is based in New York, New York.

FINANCIAL RATIOS  of  Philip Morris International (PM)

Valuation Ratios
P/E Ratio 24.7
Price to Sales 6.4
Price to Book -13.6
Price to Tangible Book
Price to Cash Flow 21.3
Price to Free Cash Flow 24.9
Growth Rates
Sales Growth Rate -0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 22.1%
Cap. Spend. - 3 Yr. Gr. Rate -0.5%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity -203.7%
Total Debt to Equity -229.1%
Interest Coverage 10
Management Effectiveness
Return On Assets 21.8%
Ret/ On Assets - 3 Yr. Avg. 22.1%
Return On Total Capital 44.1%
Ret/ On T. Cap. - 3 Yr. Avg. 42.6%
Return On Equity -53.7%
Return On Equity - 3 Yr. Avg. -60.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 64.8%
Gross Margin - 3 Yr. Avg. 64.9%
EBITDA Margin 43.9%
EBITDA Margin - 3 Yr. Avg. 43%
Operating Margin 40.5%
Oper. Margin - 3 Yr. Avg. 39.8%
Pre-Tax Margin 37.2%
Pre-Tax Margin - 3 Yr. Avg. 36.3%
Net Profit Margin 26.1%
Net Profit Margin - 3 Yr. Avg. 25.6%
Effective Tax Rate 27.9%
Eff/ Tax Rate - 3 Yr. Avg. 28.3%
Payout Ratio 91.5%

PM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PM stock intrinsic value calculation we used $26685 million for the last fiscal year's total revenue generated by Philip Morris International. The default revenue input number comes from 2016 income statement of Philip Morris International. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PM stock valuation model: a) initial revenue growth rate of 9.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 11.7%, whose default value for PM is calculated based on our internal credit rating of Philip Morris International, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Philip Morris International.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PM stock the variable cost ratio is equal to 60.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PM stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.7% for Philip Morris International.

Corporate tax rate of 27% is the nominal tax rate for Philip Morris International. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PM stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PM are equal to 31.6%.

Life of production assets of 21.3 years is the average useful life of capital assets used in Philip Morris International operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PM is equal to 0.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-12688 million for Philip Morris International - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1544.64 million for Philip Morris International is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Philip Morris International at the current share price and the inputted number of shares is $171.2 billion.


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COMPANY NEWS

▶ Should Investors Sell on Philip Morris Q1 Miss?   [Apr-21-17 12:37PM  Investopedia]
▶ Philip Morris: Up in Smoke?   [10:19AM  Barrons.com]
▶ Why Philip Morris Earnings Went Up in Smoke   [07:50AM  24/7 Wall St.]
▶ Philip Morris misses 1Q profit forecasts   [07:25AM  Associated Press]
▶ Can Philip Morris Keep Climbing Higher?   [10:01AM  Motley Fool]
▶ Philip Morris on the Street: Analyst Recommendations   [Apr-14-17 09:06AM  Market Realist]
▶ Inside Philip Morriss 1Q17 EPS Expectations   [10:36AM  Market Realist]
▶ Philip Morriss 1Q17 Earnings: Why Investors Seem Optimistic   [Apr-12-17 05:32PM  Market Realist]
▶ Why Philip Morris is Up 24% in 2017   [Apr-11-17 09:45AM  Investopedia]
▶ 10 Best Selling Cigarette Brands In India   [09:00AM  Insider Monkey]
▶ Big Tobacco Newly Prominent Within S&P 500   [Apr-05-17 11:30AM  Investopedia]
▶ 15 Most Expensive Cigarette Brands In The World   [Apr-04-17 10:33AM  Insider Monkey]
▶ The 3 Best E-Cigarette Stocks to Buy in 2017   [Mar-30-17 04:23PM  at Motley Fool]
▶ IQOS One Step Closer to FDA Consideration   [Mar-29-17 09:57AM  at Investopedia]
▶ 4 Top Dividend Stocks in Tobacco   [Mar-27-17 01:00PM  at Motley Fool]
▶ 5 Best Selling Ultra-Light Cigarettes in the World   [01:44PM  at Insider Monkey]
▶ Is Philip Morris International Stock Getting Overvalued?   [Mar-22-17 09:50AM  at Motley Fool]
Stock chart of PM Financial statements of PM
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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