Intrinsic value of Philip Morris International - PM

Previous Close

$109.68

  Intrinsic Value

$16.06

stock screener

  Rating & Target

str. sell

-85%

Previous close

$109.68

 
Intrinsic value

$16.06

 
Up/down potential

-85%

 
Rating

str. sell

*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 170.4

 

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
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
Revenue, $m
  26,685
  28,553
  30,495
  32,513
  34,613
  36,798
  39,072
  41,441
  43,910
  46,483
  49,168
  51,969
  54,893
  57,948
  61,140
  64,477
  67,966
  71,616
  75,436
  79,434
  83,621
  88,005
  92,598
  97,410
  102,453
  107,739
  113,281
  119,092
  125,185
  131,575
  138,278
Variable operating expenses, $m
 
  17,195
  18,314
  19,478
  20,689
  21,948
  23,260
  24,625
  26,049
  27,532
  29,080
  29,963
  31,649
  33,410
  35,251
  37,174
  39,186
  41,291
  43,493
  45,798
  48,212
  50,740
  53,388
  56,162
  59,070
  62,118
  65,313
  68,663
  72,176
  75,860
  79,725
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
  17,195
  18,314
  19,478
  20,689
  21,948
  23,260
  24,625
  26,049
  27,532
  29,080
  29,963
  31,649
  33,410
  35,251
  37,174
  39,186
  41,291
  43,493
  45,798
  48,212
  50,740
  53,388
  56,162
  59,070
  62,118
  65,313
  68,663
  72,176
  75,860
  79,725
Operating income, $m
  10,815
  11,358
  12,180
  13,035
  13,924
  14,850
  15,813
  16,816
  17,861
  18,951
  20,087
  22,006
  23,244
  24,538
  25,890
  27,302
  28,780
  30,326
  31,943
  33,636
  35,409
  37,265
  39,210
  41,248
  43,383
  45,622
  47,968
  50,429
  53,009
  55,715
  58,553
EBITDA, $m
  11,558
  12,514
  13,365
  14,250
  15,170
  16,128
  17,125
  18,163
  19,245
  20,373
  21,549
  22,777
  24,059
  25,398
  26,797
  28,259
  29,788
  31,388
  33,062
  34,815
  36,649
  38,571
  40,584
  42,693
  44,903
  47,220
  49,649
  52,196
  54,866
  57,667
  60,605
Interest expense (income), $m
  1,052
  956
  405
  484
  566
  652
  741
  833
  930
  1,030
  1,135
  1,244
  1,358
  1,477
  1,602
  1,731
  1,867
  2,009
  2,158
  2,313
  2,476
  2,647
  2,825
  3,012
  3,208
  3,413
  3,629
  3,854
  4,091
  4,339
  4,599
Earnings before tax, $m
  9,924
  10,402
  11,776
  12,551
  13,358
  14,198
  15,072
  15,983
  16,931
  17,921
  18,953
  20,762
  21,886
  23,061
  24,288
  25,571
  26,913
  28,316
  29,785
  31,323
  32,933
  34,619
  36,385
  38,236
  40,175
  42,209
  44,340
  46,575
  48,918
  51,376
  53,954
Tax expense, $m
  2,768
  2,808
  3,179
  3,389
  3,607
  3,833
  4,069
  4,315
  4,571
  4,839
  5,117
  5,606
  5,909
  6,226
  6,558
  6,904
  7,266
  7,645
  8,042
  8,457
  8,892
  9,347
  9,824
  10,324
  10,847
  11,396
  11,972
  12,575
  13,208
  13,872
  14,568
Net income, $m
  6,967
  7,593
  8,596
  9,162
  9,751
  10,364
  11,003
  11,667
  12,360
  13,082
  13,835
  15,156
  15,977
  16,834
  17,730
  18,667
  19,646
  20,671
  21,743
  22,866
  24,041
  25,272
  26,561
  27,912
  29,328
  30,812
  32,368
  34,000
  35,710
  37,505
  39,387

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
  34,906
  37,279
  39,747
  42,314
  44,985
  47,766
  50,662
  53,679
  56,825
  60,107
  63,532
  67,107
  70,841
  74,743
  78,823
  83,088
  87,551
  92,220
  97,108
  102,226
  107,586
  113,200
  119,083
  125,249
  131,711
  138,486
  145,589
  153,038
  160,850
  169,044
Adjusted assets (=assets-cash), $m
  32,612
  34,906
  37,279
  39,747
  42,314
  44,985
  47,766
  50,662
  53,679
  56,825
  60,107
  63,532
  67,107
  70,841
  74,743
  78,823
  83,088
  87,551
  92,220
  97,108
  102,226
  107,586
  113,200
  119,083
  125,249
  131,711
  138,486
  145,589
  153,038
  160,850
  169,044
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
  9,023
  9,636
  10,274
  10,938
  11,628
  12,347
  13,095
  13,875
  14,689
  15,537
  16,422
  17,346
  18,312
  19,320
  20,375
  21,477
  22,631
  23,838
  25,101
  26,424
  27,810
  29,261
  30,782
  32,375
  34,046
  35,797
  37,633
  39,558
  41,578
  43,696
Working capital, $m
  1,141
  114
  122
  130
  138
  147
  156
  166
  176
  186
  197
  208
  220
  232
  245
  258
  272
  286
  302
  318
  334
  352
  370
  390
  410
  431
  453
  476
  501
  526
  553
Total debt, $m
  29,067
  10,943
  13,079
  15,301
  17,611
  20,015
  22,517
  25,123
  27,839
  30,671
  33,624
  36,706
  39,924
  43,285
  46,797
  50,468
  54,307
  58,324
  62,526
  66,925
  71,531
  76,355
  81,408
  86,703
  92,252
  98,068
  104,165
  110,558
  117,262
  124,293
  131,667
Total liabilities, $m
  49,539
  31,415
  33,551
  35,773
  38,083
  40,487
  42,989
  45,595
  48,311
  51,143
  54,096
  57,178
  60,396
  63,757
  67,269
  70,940
  74,779
  78,796
  82,998
  87,397
  92,003
  96,827
  101,880
  107,175
  112,724
  118,540
  124,637
  131,030
  137,734
  144,765
  152,139
Total equity, $m
  -12,688
  3,491
  3,728
  3,975
  4,231
  4,499
  4,777
  5,066
  5,368
  5,683
  6,011
  6,353
  6,711
  7,084
  7,474
  7,882
  8,309
  8,755
  9,222
  9,711
  10,223
  10,759
  11,320
  11,908
  12,525
  13,171
  13,849
  14,559
  15,304
  16,085
  16,904
Total liabilities and equity, $m
  36,851
  34,906
  37,279
  39,748
  42,314
  44,986
  47,766
  50,661
  53,679
  56,826
  60,107
  63,531
  67,107
  70,841
  74,743
  78,822
  83,088
  87,551
  92,220
  97,108
  102,226
  107,586
  113,200
  119,083
  125,249
  131,711
  138,486
  145,589
  153,038
  160,850
  169,043
Debt-to-equity ratio
  -2.291
  3.140
  3.510
  3.850
  4.160
  4.450
  4.710
  4.960
  5.190
  5.400
  5.590
  5.780
  5.950
  6.110
  6.260
  6.400
  6.540
  6.660
  6.780
  6.890
  7.000
  7.100
  7.190
  7.280
  7.370
  7.450
  7.520
  7.590
  7.660
  7.730
  7.790
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
  7,593
  8,596
  9,162
  9,751
  10,364
  11,003
  11,667
  12,360
  13,082
  13,835
  15,156
  15,977
  16,834
  17,730
  18,667
  19,646
  20,671
  21,743
  22,866
  24,041
  25,272
  26,561
  27,912
  29,328
  30,812
  32,368
  34,000
  35,710
  37,505
  39,387
Depreciation, amort., depletion, $m
  743
  1,156
  1,185
  1,215
  1,246
  1,278
  1,312
  1,347
  1,384
  1,422
  1,462
  771
  814
  860
  907
  957
  1,008
  1,062
  1,119
  1,178
  1,241
  1,306
  1,374
  1,445
  1,520
  1,598
  1,681
  1,767
  1,857
  1,952
  2,051
Funds from operations, $m
  8,010
  8,749
  9,781
  10,377
  10,997
  11,643
  12,315
  13,014
  13,744
  14,504
  15,297
  15,927
  16,791
  17,694
  18,637
  19,623
  20,655
  21,733
  22,862
  24,044
  25,281
  26,577
  27,935
  29,357
  30,848
  32,411
  34,049
  35,766
  37,568
  39,457
  41,438
Change in working capital, $m
  -67
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  26
  27
Cash from operations, $m
  8,077
  8,742
  9,773
  10,369
  10,989
  11,634
  12,306
  13,005
  13,734
  14,494
  15,286
  15,916
  16,780
  17,682
  18,625
  19,610
  20,641
  21,719
  22,847
  24,028
  25,265
  26,560
  27,917
  29,338
  30,828
  32,389
  34,027
  35,743
  37,543
  39,431
  41,411
Maintenance CAPEX, $m
  0
  -396
  -424
  -452
  -482
  -514
  -546
  -580
  -615
  -651
  -690
  -729
  -771
  -814
  -860
  -907
  -957
  -1,008
  -1,062
  -1,119
  -1,178
  -1,241
  -1,306
  -1,374
  -1,445
  -1,520
  -1,598
  -1,681
  -1,767
  -1,857
  -1,952
New CAPEX, $m
  -1,172
  -584
  -614
  -638
  -664
  -690
  -719
  -749
  -780
  -813
  -848
  -885
  -924
  -965
  -1,009
  -1,054
  -1,103
  -1,153
  -1,207
  -1,263
  -1,323
  -1,385
  -1,451
  -1,521
  -1,594
  -1,670
  -1,751
  -1,836
  -1,925
  -2,019
  -2,118
Cash from investing activities, $m
  -968
  -980
  -1,038
  -1,090
  -1,146
  -1,204
  -1,265
  -1,329
  -1,395
  -1,464
  -1,538
  -1,614
  -1,695
  -1,779
  -1,869
  -1,961
  -2,060
  -2,161
  -2,269
  -2,382
  -2,501
  -2,626
  -2,757
  -2,895
  -3,039
  -3,190
  -3,349
  -3,517
  -3,692
  -3,876
  -4,070
Free cash flow, $m
  7,109
  7,762
  8,736
  9,279
  9,843
  10,430
  11,041
  11,677
  12,339
  13,029
  13,749
  14,301
  15,084
  15,902
  16,756
  17,649
  18,581
  19,557
  20,578
  21,645
  22,763
  23,934
  25,160
  26,444
  27,789
  29,199
  30,677
  32,226
  33,851
  35,555
  37,341
Issuance/(repayment) of debt, $m
  1,131
  -14,908
  2,136
  2,221
  2,310
  2,404
  2,502
  2,606
  2,716
  2,831
  2,953
  3,082
  3,218
  3,361
  3,512
  3,671
  3,839
  4,016
  4,203
  4,399
  4,606
  4,824
  5,053
  5,295
  5,549
  5,816
  6,097
  6,393
  6,704
  7,031
  7,375
Issuance/(repurchase) of shares, $m
  0
  9,608
  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
  -5,300
  2,136
  2,221
  2,310
  2,404
  2,502
  2,606
  2,716
  2,831
  2,953
  3,082
  3,218
  3,361
  3,512
  3,671
  3,839
  4,016
  4,203
  4,399
  4,606
  4,824
  5,053
  5,295
  5,549
  5,816
  6,097
  6,393
  6,704
  7,031
  7,375
Total cash flow (excl. dividends), $m
  7,200
  2,462
  10,872
  11,500
  12,153
  12,834
  13,543
  14,283
  15,055
  15,861
  16,702
  17,383
  18,302
  19,263
  20,268
  21,320
  22,421
  23,573
  24,780
  26,045
  27,369
  28,758
  30,213
  31,738
  33,338
  35,015
  36,774
  38,619
  40,555
  42,585
  44,716
Retained Cash Flow (-), $m
  -556
  -17,202
  -237
  -247
  -257
  -267
  -278
  -290
  -302
  -315
  -328
  -342
  -358
  -373
  -390
  -408
  -427
  -446
  -467
  -489
  -512
  -536
  -561
  -588
  -617
  -646
  -677
  -710
  -745
  -781
  -819
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
 
  -13,716
  10,635
  11,253
  11,897
  12,567
  13,265
  13,994
  14,753
  15,546
  16,374
  17,041
  17,945
  18,890
  19,878
  20,912
  21,994
  23,127
  24,313
  25,556
  26,858
  28,222
  29,651
  31,150
  32,721
  34,369
  36,097
  37,909
  39,810
  41,804
  43,896
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
 
  -12,279
  8,435
  7,820
  7,158
  6,464
  5,755
  5,048
  4,359
  3,702
  3,089
  2,501
  2,010
  1,583
  1,220
  918
  675
  484
  338
  229
  151
  97
  60
  36
  21
  11
  6
  3
  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. 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 24.4
Price to Sales 6.4
Price to Book -13.4
Price to Tangible Book
Price to Cash Flow 21.1
Price to Free Cash Flow 24.6
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 7% 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 1553.23 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 $170.4 billion.

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COMPANY NEWS

▶ Top 10 Biggest Tobacco Companies in the World in 2017   [Dec-13-17 05:19PM  Insider Monkey]
▶ 3 High-Yield Stocks With Virtual Monopolies   [Dec-11-17 04:27PM  Motley Fool]
▶ How Analysts View Altria Group and Philip Morris after 3Q17   [Dec-06-17 07:31AM  Market Realist]
▶ How to Invest in E-Cigarettes   [Dec-03-17 07:04AM  Motley Fool]
▶ These Dividend Stocks Will Add Value To Your Portfolio   [Nov-23-17 08:02AM  Simply Wall St.]
▶ Where's the Fire, Japan Tobacco?   [Nov-22-17 10:55PM  Bloomberg]
▶ Big Tobacco's anti-smoking ads begin after decade of delay   [Nov-21-17 03:47PM  Associated Press]
▶ Anti-smoking ads forced to begin after years of delay   [01:33PM  Yahoo Finance Video]
▶ Top Staples Dividend Picks For The Day   [Nov-15-17 03:02PM  Simply Wall St.]
▶ 3 High-Yield Stocks With Virtual Monopolies   [Nov-09-17 09:16AM  Motley Fool]
▶ 5 Things Philip Morris Management Wants You to Know   [Oct-30-17 01:03PM  Motley Fool]
▶ Philip Morriss Big Smokeless Bet   [Oct-29-17 11:21PM  The Wall Street Journal]
▶ Behind Philip Morris's Smokeless Bet   [10:10PM  The Wall Street Journal]
▶ 3 Hedge-Fund Stocks to Buy and Forget About   [Oct-28-17 11:28AM  Motley Fool]
▶ Trial to begin against Philip Morris in smoker's death   [Oct-22-17 05:34PM  Associated Press]
▶ Company News For Oct 20, 2017   [10:28AM  Zacks]
▶ Philip Morris: Oops   [11:06AM  Barrons.com]
▶ 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]
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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