Intrinsic value of Philip Morris International - PM

Previous Close

$112.51

  Intrinsic Value

$12.93

stock screener

  Rating & Target

str. sell

-89%

  Value-price divergence*

-28%

Previous close

$112.51

 
Intrinsic value

$12.93

 
Up/down potential

-89%

 
Rating

str. sell

 
Value-price divergence*

-28%

*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 175.2

 

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
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
Revenue, $m
  26,685
  27,752
  28,890
  30,101
  31,386
  32,750
  34,194
  35,722
  37,337
  39,043
  40,844
  42,744
  44,747
  46,858
  49,082
  51,423
  53,889
  56,483
  59,213
  62,085
  65,106
  68,282
  71,621
  75,132
  78,822
  82,700
  86,775
  91,058
  95,558
  100,286
  105,253
Variable operating expenses, $m
 
  16,733
  17,389
  18,087
  18,828
  19,614
  20,447
  21,328
  22,259
  23,243
  24,281
  24,644
  25,799
  27,016
  28,298
  29,648
  31,070
  32,566
  34,140
  35,795
  37,537
  39,368
  41,293
  43,317
  45,445
  47,681
  50,031
  52,500
  55,094
  57,820
  60,684
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
  16,733
  17,389
  18,087
  18,828
  19,614
  20,447
  21,328
  22,259
  23,243
  24,281
  24,644
  25,799
  27,016
  28,298
  29,648
  31,070
  32,566
  34,140
  35,795
  37,537
  39,368
  41,293
  43,317
  45,445
  47,681
  50,031
  52,500
  55,094
  57,820
  60,684
Operating income, $m
  10,815
  11,019
  11,501
  12,014
  12,558
  13,135
  13,747
  14,394
  15,078
  15,800
  16,563
  18,100
  18,948
  19,842
  20,783
  21,775
  22,819
  23,918
  25,074
  26,290
  27,569
  28,914
  30,328
  31,814
  33,377
  35,019
  36,745
  38,558
  40,464
  42,466
  44,569
EBITDA, $m
  11,558
  12,163
  12,662
  13,193
  13,756
  14,354
  14,987
  15,656
  16,364
  17,112
  17,901
  18,734
  19,612
  20,537
  21,512
  22,538
  23,618
  24,756
  25,952
  27,211
  28,535
  29,927
  31,390
  32,929
  34,546
  36,246
  38,032
  39,909
  41,881
  43,953
  46,130
Interest expense (income), $m
  1,052
  956
  372
  419
  468
  520
  576
  635
  697
  762
  832
  905
  983
  1,064
  1,150
  1,241
  1,336
  1,436
  1,542
  1,653
  1,770
  1,893
  2,022
  2,158
  2,301
  2,451
  2,609
  2,775
  2,949
  3,133
  3,325
Earnings before tax, $m
  9,924
  10,063
  11,129
  11,595
  12,090
  12,615
  13,171
  13,759
  14,381
  15,038
  15,731
  17,194
  17,965
  18,778
  19,633
  20,534
  21,483
  22,481
  23,532
  24,637
  25,799
  27,021
  28,305
  29,656
  31,076
  32,568
  34,136
  35,783
  37,514
  39,333
  41,244
Tax expense, $m
  2,768
  2,717
  3,005
  3,131
  3,264
  3,406
  3,556
  3,715
  3,883
  4,060
  4,247
  4,643
  4,851
  5,070
  5,301
  5,544
  5,800
  6,070
  6,354
  6,652
  6,966
  7,296
  7,642
  8,007
  8,390
  8,793
  9,217
  9,661
  10,129
  10,620
  11,136
Net income, $m
  6,967
  7,346
  8,124
  8,464
  8,826
  9,209
  9,615
  10,044
  10,498
  10,978
  11,484
  12,552
  13,115
  13,708
  14,332
  14,990
  15,683
  16,411
  17,178
  17,985
  18,833
  19,725
  20,663
  21,649
  22,685
  23,774
  24,919
  26,122
  27,385
  28,713
  30,108

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
  33,927
  35,318
  36,798
  38,370
  40,036
  41,802
  43,670
  45,644
  47,730
  49,932
  52,254
  54,703
  57,283
  60,002
  62,865
  65,879
  69,051
  72,388
  75,899
  79,591
  83,474
  87,556
  91,848
  96,359
  101,100
  106,082
  111,318
  116,819
  122,599
  128,671
Adjusted assets (=assets-cash), $m
  32,612
  33,927
  35,318
  36,798
  38,370
  40,036
  41,802
  43,670
  45,644
  47,730
  49,932
  52,254
  54,703
  57,283
  60,002
  62,865
  65,879
  69,051
  72,388
  75,899
  79,591
  83,474
  87,556
  91,848
  96,359
  101,100
  106,082
  111,318
  116,819
  122,599
  128,671
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
  8,770
  9,129
  9,512
  9,918
  10,349
  10,805
  11,288
  11,799
  12,338
  12,907
  13,507
  14,140
  14,807
  15,510
  16,250
  17,029
  17,849
  18,711
  19,619
  20,573
  21,577
  22,632
  23,742
  24,908
  26,133
  27,421
  28,774
  30,196
  31,690
  33,260
Working capital, $m
  1,141
  111
  116
  120
  126
  131
  137
  143
  149
  156
  163
  171
  179
  187
  196
  206
  216
  226
  237
  248
  260
  273
  286
  301
  315
  331
  347
  364
  382
  401
  421
Total debt, $m
  29,067
  10,062
  11,314
  12,646
  14,061
  15,561
  17,150
  18,831
  20,608
  22,485
  24,466
  26,557
  28,761
  31,083
  33,530
  36,106
  38,819
  41,674
  44,677
  47,837
  51,160
  54,654
  58,329
  62,191
  66,251
  70,518
  75,002
  79,714
  84,665
  89,867
  95,332
Total liabilities, $m
  49,539
  30,534
  31,786
  33,118
  34,533
  36,033
  37,622
  39,303
  41,080
  42,957
  44,938
  47,029
  49,233
  51,555
  54,002
  56,578
  59,291
  62,146
  65,149
  68,309
  71,632
  75,126
  78,801
  82,663
  86,723
  90,990
  95,474
  100,186
  105,137
  110,339
  115,804
Total equity, $m
  -12,688
  3,393
  3,532
  3,680
  3,837
  4,004
  4,180
  4,367
  4,564
  4,773
  4,993
  5,225
  5,470
  5,728
  6,000
  6,286
  6,588
  6,905
  7,239
  7,590
  7,959
  8,347
  8,756
  9,185
  9,636
  10,110
  10,608
  11,132
  11,682
  12,260
  12,867
Total liabilities and equity, $m
  36,851
  33,927
  35,318
  36,798
  38,370
  40,037
  41,802
  43,670
  45,644
  47,730
  49,931
  52,254
  54,703
  57,283
  60,002
  62,864
  65,879
  69,051
  72,388
  75,899
  79,591
  83,473
  87,557
  91,848
  96,359
  101,100
  106,082
  111,318
  116,819
  122,599
  128,671
Debt-to-equity ratio
  -2.291
  2.970
  3.200
  3.440
  3.660
  3.890
  4.100
  4.310
  4.510
  4.710
  4.900
  5.080
  5.260
  5.430
  5.590
  5.740
  5.890
  6.040
  6.170
  6.300
  6.430
  6.550
  6.660
  6.770
  6.880
  6.980
  7.070
  7.160
  7.250
  7.330
  7.410
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
  7,346
  8,124
  8,464
  8,826
  9,209
  9,615
  10,044
  10,498
  10,978
  11,484
  12,552
  13,115
  13,708
  14,332
  14,990
  15,683
  16,411
  17,178
  17,985
  18,833
  19,725
  20,663
  21,649
  22,685
  23,774
  24,919
  26,122
  27,385
  28,713
  30,108
Depreciation, amort., depletion, $m
  743
  1,144
  1,161
  1,179
  1,198
  1,218
  1,240
  1,262
  1,286
  1,312
  1,338
  634
  664
  695
  728
  763
  799
  838
  878
  921
  966
  1,013
  1,063
  1,115
  1,169
  1,227
  1,287
  1,351
  1,418
  1,488
  1,561
Funds from operations, $m
  8,010
  8,490
  9,285
  9,643
  10,024
  10,427
  10,855
  11,307
  11,785
  12,289
  12,822
  13,186
  13,779
  14,403
  15,061
  15,753
  16,482
  17,249
  18,057
  18,906
  19,799
  20,738
  21,726
  22,764
  23,855
  25,001
  26,206
  27,473
  28,803
  30,201
  31,670
Change in working capital, $m
  -67
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
Cash from operations, $m
  8,077
  8,486
  9,280
  9,638
  10,019
  10,422
  10,849
  11,301
  11,778
  12,282
  12,815
  13,178
  13,771
  14,394
  15,052
  15,744
  16,472
  17,239
  18,046
  18,894
  19,787
  20,725
  21,712
  22,749
  23,840
  24,986
  26,190
  27,455
  28,785
  30,182
  31,650
Maintenance CAPEX, $m
  0
  -396
  -412
  -429
  -447
  -466
  -486
  -507
  -530
  -554
  -579
  -606
  -634
  -664
  -695
  -728
  -763
  -799
  -838
  -878
  -921
  -966
  -1,013
  -1,063
  -1,115
  -1,169
  -1,227
  -1,287
  -1,351
  -1,418
  -1,488
New CAPEX, $m
  -1,172
  -331
  -360
  -383
  -406
  -431
  -456
  -483
  -510
  -539
  -569
  -600
  -633
  -667
  -703
  -740
  -779
  -820
  -863
  -907
  -954
  -1,004
  -1,055
  -1,109
  -1,166
  -1,226
  -1,288
  -1,353
  -1,422
  -1,494
  -1,570
Cash from investing activities, $m
  -968
  -727
  -772
  -812
  -853
  -897
  -942
  -990
  -1,040
  -1,093
  -1,148
  -1,206
  -1,267
  -1,331
  -1,398
  -1,468
  -1,542
  -1,619
  -1,701
  -1,785
  -1,875
  -1,970
  -2,068
  -2,172
  -2,281
  -2,395
  -2,515
  -2,640
  -2,773
  -2,912
  -3,058
Free cash flow, $m
  7,109
  7,759
  8,509
  8,827
  9,166
  9,525
  9,907
  10,310
  10,738
  11,189
  11,666
  11,972
  12,503
  13,063
  13,654
  14,276
  14,930
  15,620
  16,345
  17,108
  17,911
  18,756
  19,644
  20,578
  21,559
  22,591
  23,675
  24,815
  26,012
  27,270
  28,592
Issuance/(repayment) of debt, $m
  1,131
  -15,789
  1,252
  1,332
  1,414
  1,500
  1,589
  1,681
  1,777
  1,877
  1,981
  2,090
  2,204
  2,323
  2,447
  2,577
  2,712
  2,855
  3,004
  3,160
  3,323
  3,495
  3,674
  3,862
  4,060
  4,267
  4,484
  4,712
  4,951
  5,202
  5,465
Issuance/(repurchase) of shares, $m
  0
  9,758
  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
  -6,031
  1,252
  1,332
  1,414
  1,500
  1,589
  1,681
  1,777
  1,877
  1,981
  2,090
  2,204
  2,323
  2,447
  2,577
  2,712
  2,855
  3,004
  3,160
  3,323
  3,495
  3,674
  3,862
  4,060
  4,267
  4,484
  4,712
  4,951
  5,202
  5,465
Total cash flow (excl. dividends), $m
  7,200
  1,728
  9,761
  10,159
  10,580
  11,025
  11,495
  11,992
  12,515
  13,066
  13,648
  14,062
  14,707
  15,386
  16,100
  16,852
  17,643
  18,474
  19,349
  20,268
  21,235
  22,250
  23,318
  24,440
  25,619
  26,858
  28,159
  29,527
  30,963
  32,472
  34,057
Retained Cash Flow (-), $m
  -556
  -17,104
  -139
  -148
  -157
  -167
  -177
  -187
  -197
  -209
  -220
  -232
  -245
  -258
  -272
  -286
  -301
  -317
  -334
  -351
  -369
  -388
  -408
  -429
  -451
  -474
  -498
  -524
  -550
  -578
  -607
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
 
  -14,353
  9,622
  10,011
  10,423
  10,859
  11,319
  11,805
  12,317
  12,858
  13,428
  13,830
  14,462
  15,128
  15,829
  16,566
  17,341
  18,157
  19,015
  19,917
  20,865
  21,862
  22,910
  24,011
  25,168
  26,384
  27,661
  29,003
  30,413
  31,894
  33,450
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
 
  -12,849
  7,632
  6,957
  6,271
  5,585
  4,911
  4,259
  3,639
  3,062
  2,533
  2,030
  1,620
  1,268
  971
  728
  532
  380
  264
  179
  117
  75
  46
  28
  16
  9
  5
  2
  1
  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. 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 25.1
Price to Sales 6.5
Price to Book -13.8
Price to Tangible Book
Price to Cash Flow 21.6
Price to Free Cash Flow 25.3
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 4% 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 1556.97 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 $175.2 billion.

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COMPANY NEWS

▶ Philip Morris misses 3Q profit forecasts   [07:45AM  Associated Press]
▶ Could Altria Group Be a Millionaire-Maker Stock?   [Oct-17-17 09:30AM  Motley Fool]
▶ Consumer Sector Earnings Coverage for October 1620, 2017   [Oct-16-17 01:35PM  Market Realist]
▶ Philip Morris: Still Smoking?   [11:04AM  Barrons.com]
▶ Philip Morris Stock Could Pack On 22%   [04:06PM  Barrons.com]
▶ Goldman Sachs and the sin trade   [01:36PM  CNBC Videos]
▶ Top 3 Stocks for Retirees to Consider   [07:36AM  Motley Fool]
▶ Tobacco Stocks Ready to Bounce   [Sep-26-17 11:28AM  Investopedia]
▶ 3 Stocks That Just Increased Their Dividends   [Sep-22-17 11:46AM  Motley Fool]
▶ Our 5 Top Picks For A Booming Marijuana Market   [Sep-20-17 07:30PM  Oilprice.com]
▶ [$$] Big tobacco sends out smoke-free signal   [12:01AM  Financial Times]
▶ 5 Things Philip Morris Management Wants You to Know   [Sep-17-17 08:10AM  Motley Fool]
▶ Philip Morris is trying to kick a smoking habit   [Sep-13-17 10:21AM  Yahoo Finance Video]
▶ Philip Morris boosts dividend by 2.9%   [09:14AM  MarketWatch]
▶ [$$] PMI pledges $1bn to stub out smoking around the world   [Sep-12-17 11:05PM  Financial Times]
▶ The Simple Reason Why I Won't Buy Altria Group Stock   [Sep-09-17 11:32AM  Motley Fool]
▶ Better Buy: Philip Morris International Inc vs. Verizon   [Sep-08-17 07:17AM  Motley Fool]
▶ Philip Morris: Where There's Smokeless, There's Fire   [Sep-06-17 01:11PM  Barrons.com]
▶ Motor racing-Ferrari continue with tobacco sponsor   [Sep-04-17 11:35AM  Reuters]
▶ Corrections & Amplifications   [Sep-02-17 12:03AM  The Wall Street Journal]
▶ The Smart Money Likes These 5 Stocks   [08:43AM  Motley Fool]
▶ 9 Stocks Due For Dividend Increases This Fall   [Aug-28-17 09:22AM  Forbes]
▶ 2 Reasons Altria Group Inc. Stock Could Rise   [Aug-25-17 08:05PM  Motley Fool]
▶ Altria Hikes Dividend 8.2%   [Aug-24-17 04:47PM  Barrons.com]
▶ Vaping in Asia Could Save Big Tobacco   [Aug-20-17 03:00PM  TheStreet.com]
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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