Intrinsic value of Philip Morris International - PM

Previous Close

$84.68

  Intrinsic Value

$15.60

stock screener

  Rating & Target

str. sell

-82%

Previous close

$84.68

 
Intrinsic value

$15.60

 
Up/down potential

-82%

 
Rating

str. sell

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 2017), $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 131.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.57
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
Revenue, $m
  81,378
  84,861
  88,554
  92,466
  96,603
  100,977
  105,597
  110,473
  115,616
  121,038
  126,753
  132,772
  139,111
  145,783
  152,806
  160,194
  167,966
  176,141
  184,736
  193,773
  203,274
  213,259
  223,754
  234,783
  246,373
  258,550
  271,344
  284,785
  298,905
  313,737
Variable operating expenses, $m
  63,514
  66,189
  69,026
  72,030
  75,208
  78,567
  82,116
  85,861
  89,811
  93,976
  97,355
  101,978
  106,847
  111,972
  117,365
  123,040
  129,010
  135,288
  141,890
  148,832
  156,128
  163,798
  171,859
  180,330
  189,231
  198,584
  208,411
  218,735
  229,580
  240,972
Fixed operating expenses, $m
  5,889
  6,018
  6,151
  6,286
  6,424
  6,566
  6,710
  6,858
  7,009
  7,163
  7,320
  7,481
  7,646
  7,814
  7,986
  8,162
  8,341
  8,525
  8,712
  8,904
  9,100
  9,300
  9,505
  9,714
  9,928
  10,146
  10,369
  10,597
  10,831
  11,069
Total operating expenses, $m
  69,403
  72,207
  75,177
  78,316
  81,632
  85,133
  88,826
  92,719
  96,820
  101,139
  104,675
  109,459
  114,493
  119,786
  125,351
  131,202
  137,351
  143,813
  150,602
  157,736
  165,228
  173,098
  181,364
  190,044
  199,159
  208,730
  218,780
  229,332
  240,411
  252,041
Operating income, $m
  11,975
  12,654
  13,378
  14,150
  14,971
  15,844
  16,771
  17,754
  18,796
  19,900
  22,077
  23,312
  24,618
  25,997
  27,454
  28,992
  30,615
  32,327
  34,133
  36,038
  38,045
  40,161
  42,390
  44,739
  47,214
  49,819
  52,563
  55,453
  58,494
  61,696
EBITDA, $m
  14,719
  15,471
  16,274
  17,129
  18,039
  19,005
  20,030
  21,117
  22,269
  23,488
  24,777
  26,140
  27,581
  29,102
  30,709
  32,404
  34,193
  36,079
  38,068
  40,165
  42,375
  44,703
  47,156
  49,740
  52,461
  55,327
  58,343
  61,519
  64,861
  68,379
Interest expense (income), $m
  1,052
  1,854
  1,057
  1,150
  1,249
  1,353
  1,464
  1,581
  1,704
  1,835
  1,972
  2,117
  2,270
  2,431
  2,600
  2,779
  2,966
  3,164
  3,372
  3,590
  3,820
  4,061
  4,315
  4,582
  4,863
  5,158
  5,468
  5,793
  6,135
  6,494
  6,872
Earnings before tax, $m
  10,121
  11,597
  12,228
  12,901
  13,618
  14,380
  15,190
  16,050
  16,962
  17,928
  19,960
  21,043
  22,187
  23,397
  24,675
  26,026
  27,451
  28,956
  30,543
  32,218
  33,984
  35,846
  37,808
  39,876
  42,056
  44,352
  46,770
  49,318
  52,000
  54,824
Tax expense, $m
  2,733
  3,131
  3,302
  3,483
  3,677
  3,883
  4,101
  4,334
  4,580
  4,840
  5,389
  5,681
  5,991
  6,317
  6,662
  7,027
  7,412
  7,818
  8,247
  8,699
  9,176
  9,678
  10,208
  10,767
  11,355
  11,975
  12,628
  13,316
  14,040
  14,803
Net income, $m
  7,388
  8,466
  8,926
  9,418
  9,941
  10,498
  11,089
  11,717
  12,382
  13,087
  14,571
  15,361
  16,197
  17,080
  18,013
  18,999
  20,039
  21,138
  22,297
  23,519
  24,808
  26,167
  27,600
  29,110
  30,701
  32,377
  34,142
  36,002
  37,960
  40,022

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  44,762
  46,678
  48,710
  50,861
  53,137
  55,543
  58,084
  60,766
  63,595
  66,578
  69,721
  73,032
  76,518
  80,189
  84,051
  88,116
  92,391
  96,887
  101,615
  106,586
  111,812
  117,304
  123,077
  129,144
  135,519
  142,217
  149,254
  156,647
  164,414
  172,573
Adjusted assets (=assets-cash), $m
  44,762
  46,678
  48,710
  50,861
  53,137
  55,543
  58,084
  60,766
  63,595
  66,578
  69,721
  73,032
  76,518
  80,189
  84,051
  88,116
  92,391
  96,887
  101,615
  106,586
  111,812
  117,304
  123,077
  129,144
  135,519
  142,217
  149,254
  156,647
  164,414
  172,573
Revenue / Adjusted assets
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
  1.818
Average production assets, $m
  17,334
  18,075
  18,862
  19,695
  20,577
  21,508
  22,492
  23,531
  24,626
  25,781
  26,998
  28,280
  29,631
  31,052
  32,548
  34,121
  35,777
  37,518
  39,349
  41,274
  43,297
  45,424
  47,660
  50,009
  52,477
  55,071
  57,796
  60,659
  63,667
  66,826
Working capital, $m
  6,836
  7,128
  7,439
  7,767
  8,115
  8,482
  8,870
  9,280
  9,712
  10,167
  10,647
  11,153
  11,685
  12,246
  12,836
  13,456
  14,109
  14,796
  15,518
  16,277
  17,075
  17,914
  18,795
  19,722
  20,695
  21,718
  22,793
  23,922
  25,108
  26,354
Total debt, $m
  19,571
  21,295
  23,124
  25,060
  27,108
  29,274
  31,561
  33,974
  36,521
  39,205
  42,034
  45,014
  48,152
  51,455
  54,931
  58,589
  62,437
  66,483
  70,739
  75,212
  79,915
  84,859
  90,054
  95,514
  101,252
  107,280
  113,614
  120,267
  127,258
  134,600
Total liabilities, $m
  40,286
  42,010
  43,839
  45,775
  47,823
  49,989
  52,276
  54,689
  57,236
  59,920
  62,749
  65,729
  68,867
  72,170
  75,646
  79,304
  83,152
  87,198
  91,454
  95,927
  100,630
  105,574
  110,769
  116,229
  121,967
  127,995
  134,329
  140,982
  147,973
  155,315
Total equity, $m
  4,476
  4,668
  4,871
  5,086
  5,314
  5,554
  5,808
  6,077
  6,360
  6,658
  6,972
  7,303
  7,652
  8,019
  8,405
  8,812
  9,239
  9,689
  10,162
  10,659
  11,181
  11,730
  12,308
  12,914
  13,552
  14,222
  14,925
  15,665
  16,441
  17,257
Total liabilities and equity, $m
  44,762
  46,678
  48,710
  50,861
  53,137
  55,543
  58,084
  60,766
  63,596
  66,578
  69,721
  73,032
  76,519
  80,189
  84,051
  88,116
  92,391
  96,887
  101,616
  106,586
  111,811
  117,304
  123,077
  129,143
  135,519
  142,217
  149,254
  156,647
  164,414
  172,572
Debt-to-equity ratio
  4.370
  4.560
  4.750
  4.930
  5.100
  5.270
  5.430
  5.590
  5.740
  5.890
  6.030
  6.160
  6.290
  6.420
  6.540
  6.650
  6.760
  6.860
  6.960
  7.060
  7.150
  7.230
  7.320
  7.400
  7.470
  7.540
  7.610
  7.680
  7.740
  7.800
Adjusted equity ratio
  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
  7,388
  8,466
  8,926
  9,418
  9,941
  10,498
  11,089
  11,717
  12,382
  13,087
  14,571
  15,361
  16,197
  17,080
  18,013
  18,999
  20,039
  21,138
  22,297
  23,519
  24,808
  26,167
  27,600
  29,110
  30,701
  32,377
  34,142
  36,002
  37,960
  40,022
Depreciation, amort., depletion, $m
  2,743
  2,817
  2,896
  2,979
  3,067
  3,161
  3,259
  3,363
  3,472
  3,588
  2,700
  2,828
  2,963
  3,105
  3,255
  3,412
  3,578
  3,752
  3,935
  4,127
  4,330
  4,542
  4,766
  5,001
  5,248
  5,507
  5,780
  6,066
  6,367
  6,683
Funds from operations, $m
  10,132
  11,283
  11,822
  12,397
  13,008
  13,658
  14,348
  15,079
  15,854
  16,675
  17,271
  18,189
  19,160
  20,185
  21,268
  22,411
  23,617
  24,890
  26,231
  27,646
  29,138
  30,710
  32,366
  34,111
  35,948
  37,884
  39,922
  42,068
  44,327
  46,704
Change in working capital, $m
  276
  293
  310
  329
  348
  367
  388
  410
  432
  455
  480
  506
  532
  561
  590
  621
  653
  687
  722
  759
  798
  839
  882
  926
  974
  1,023
  1,075
  1,129
  1,186
  1,246
Cash from operations, $m
  9,856
  10,990
  11,512
  12,069
  12,661
  13,291
  13,960
  14,670
  15,422
  16,220
  16,791
  17,683
  18,627
  19,625
  20,678
  21,790
  22,964
  24,203
  25,509
  26,887
  28,340
  29,871
  31,484
  33,184
  34,975
  36,861
  38,847
  40,939
  43,141
  45,458
Maintenance CAPEX, $m
  -1,661
  -1,733
  -1,808
  -1,886
  -1,970
  -2,058
  -2,151
  -2,249
  -2,353
  -2,463
  -2,578
  -2,700
  -2,828
  -2,963
  -3,105
  -3,255
  -3,412
  -3,578
  -3,752
  -3,935
  -4,127
  -4,330
  -4,542
  -4,766
  -5,001
  -5,248
  -5,507
  -5,780
  -6,066
  -6,367
New CAPEX, $m
  -720
  -742
  -787
  -833
  -881
  -932
  -984
  -1,039
  -1,096
  -1,155
  -1,217
  -1,282
  -1,350
  -1,421
  -1,496
  -1,574
  -1,655
  -1,741
  -1,831
  -1,925
  -2,024
  -2,127
  -2,235
  -2,349
  -2,469
  -2,594
  -2,725
  -2,863
  -3,008
  -3,159
Cash from investing activities, $m
  -2,381
  -2,475
  -2,595
  -2,719
  -2,851
  -2,990
  -3,135
  -3,288
  -3,449
  -3,618
  -3,795
  -3,982
  -4,178
  -4,384
  -4,601
  -4,829
  -5,067
  -5,319
  -5,583
  -5,860
  -6,151
  -6,457
  -6,777
  -7,115
  -7,470
  -7,842
  -8,232
  -8,643
  -9,074
  -9,526
Free cash flow, $m
  7,475
  8,515
  8,918
  9,349
  9,810
  10,302
  10,825
  11,382
  11,974
  12,602
  12,996
  13,702
  14,449
  15,240
  16,077
  16,962
  17,897
  18,884
  19,927
  21,027
  22,189
  23,414
  24,706
  26,069
  27,506
  29,020
  30,615
  32,296
  34,067
  35,932
Issuance/(repayment) of debt, $m
  -14,768
  1,724
  1,828
  1,936
  2,048
  2,165
  2,287
  2,414
  2,546
  2,684
  2,829
  2,980
  3,138
  3,303
  3,476
  3,658
  3,848
  4,047
  4,255
  4,474
  4,703
  4,943
  5,196
  5,460
  5,737
  6,028
  6,334
  6,654
  6,990
  7,343
Issuance/(repurchase) of shares, $m
  9,174
  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  
  -5,594
  1,724
  1,828
  1,936
  2,048
  2,165
  2,287
  2,414
  2,546
  2,684
  2,829
  2,980
  3,138
  3,303
  3,476
  3,658
  3,848
  4,047
  4,255
  4,474
  4,703
  4,943
  5,196
  5,460
  5,737
  6,028
  6,334
  6,654
  6,990
  7,343
Total cash flow (excl. dividends), $m
  1,881
  10,240
  10,746
  11,285
  11,858
  12,467
  13,112
  13,796
  14,520
  15,286
  15,824
  16,681
  17,587
  18,544
  19,553
  20,619
  21,744
  22,931
  24,182
  25,501
  26,892
  28,358
  29,902
  31,529
  33,243
  35,048
  36,949
  38,950
  41,057
  43,275
Retained Cash Flow (-), $m
  -16,562
  -192
  -203
  -215
  -228
  -241
  -254
  -268
  -283
  -298
  -314
  -331
  -349
  -367
  -386
  -406
  -428
  -450
  -473
  -497
  -523
  -549
  -577
  -607
  -637
  -670
  -704
  -739
  -777
  -816
Prev. year cash balance distribution, $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 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
  -14,682
  10,048
  10,543
  11,070
  11,631
  12,226
  12,858
  13,528
  14,237
  14,988
  15,510
  16,350
  17,238
  18,176
  19,167
  20,213
  21,317
  22,481
  23,709
  25,004
  26,369
  27,808
  29,325
  30,922
  32,605
  34,378
  36,245
  38,211
  40,281
  42,459
Discount rate, %
  10.90
  11.45
  12.02
  12.62
  13.25
  13.91
  14.61
  15.34
  16.10
  16.91
  17.75
  18.64
  19.57
  20.55
  21.58
  22.66
  23.79
  24.98
  26.23
  27.54
  28.92
  30.37
  31.89
  33.48
  35.15
  36.91
  38.76
  40.69
  42.73
  44.87
PV of cash for distribution, $m
  -13,239
  8,090
  7,501
  6,882
  6,244
  5,596
  4,951
  4,320
  3,714
  3,142
  2,569
  2,102
  1,687
  1,327
  1,022
  770
  566
  406
  284
  193
  127
  81
  50
  30
  17
  10
  5
  3
  1
  1
Current shareholders' claim on cash, %
  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. is a holding company. The Company is engaged in the manufacture and sale of cigarettes, other tobacco products and other nicotine-containing products in markets outside of the United States. Its segments include European Union (EU); Eastern Europe, Middle East & Africa (EEMA); Asia, and Latin America & Canada. The Company's portfolio of international and local brands is led by Marlboro. Its mid-price brands are L&M, Lark, Merit, Muratti and Philip Morris. Its other international brands include Bond Street, Chesterfield, Next and Red & White. The Company also owns various local 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.

FINANCIAL RATIOS  of  Philip Morris International (PM)

Valuation Ratios
P/E Ratio 18.9
Price to Sales 4.9
Price to Book -10.4
Price to Tangible Book
Price to Cash Flow 16.3
Price to Free Cash Flow 19
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 $78098 million for the last fiscal year's total revenue generated by Philip Morris International. The default revenue input number comes from 2017 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 4.2% 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 10.9%, 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 78.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5762 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 5.4% 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 21.3%.

Life of production assets of 10 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 8.4%. 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 - $-12086 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 1553 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 $131.5 billion.

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