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Philip Morris: Valuation Multiple versus Peers

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Valuation multiple

The strengthening broader equity market and strong fourth-quarter earnings have increased Philip Morris’s (PM) stock price, which has led to an increase in its valuation multiple. As of February 25, Philip Morris was trading at a forward PE multiple of 15.9x, compared to 12.6x at the beginning of 2019. Altria Group (MO) was trading at a forward PE multiple of 11.9x on February 25.

Also, Philip Morris was trading at 16.1 times analysts’ 2019 EPS estimate of $5.39 and 14.8 times analysts’ 2020 EPS estimates of $5.84 with its EPS expected to rise 5.7% in 2019 and 8.4% in 2020.

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Analysts’ recommendations

Of the 20 analysts who follow Philip Morris, 50% favor a “buy” while 35% have a “hold” rating and 15% have a “sell” rating. On average, analysts have set a 12-month price target of $88.06, which represents an upside potential of 1.7% from February 25’s closing price of $86.60. Since the announcement of its fourth-quarter earnings on February 7, Cowen and Company has raised its price target from $69 to $80.

Peer comparisons

Of the 17 analysts who cover Altria Group (MO), 47.1% favor a “buy” while 35.3% have given the stock “hold” ratings and 17.6% have given it “sell” ratings. Altria Group’s average price target of $56.80 implies 9.6% upside to its stock price of $51.84.

Next in this series, we’ll look at analysts’ revenue estimates for 2019.

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