DCF Studio

    PM · NYQ · Consumer Defensive

    Philip Morris International Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 155.83

    Market price

    USD 188.62

    Implied upside

    -17.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 155.83-17.4%
    Exit multiple
    USD 237.16+25.7%
    Market price
    USD 188.62

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn8bn16bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 44.1bnUSD 47.9bnUSD 52.0bnUSD 56.5bnUSD 61.3bn+8.6%
    EBITUSD 16.0bnUSD 17.4bnUSD 18.9bnUSD 20.5bnUSD 22.3bn+8.6%
    NOPATUSD 12.7bnUSD 13.8bnUSD 14.9bnUSD 16.2bnUSD 17.6bn+8.6%
    Add depreciation & amortisationUSD 1.9bnUSD 2.0bnUSD 2.2bnUSD 2.4bnUSD 2.6bn+8.6%
    Less capital expenditureUSD -1.6bnUSD -1.8bnUSD -1.9bnUSD -2.1bnUSD -2.3bn+8.6%
    Less increase in working capitalUSD -1.3bnUSD -1.4bnUSD -1.6bnUSD -1.7bnUSD -1.8bn+8.6%
    Free cashflow to firmUSD 11.6bnUSD 12.6bnUSD 13.7bnUSD 14.8bnUSD 16.1bn+8.6%
    Discount factor0.96380.89530.83160.77250.7176-
    Present valueUSD 11.2bnUSD 11.3bnUSD 11.4bnUSD 11.5bnUSD 11.6bn+0.9%
    Present Value Of The ForecastUSD 56.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.595Reported 0.395, pulled toward 1.0 (Blume)
    Cost of equity8.27%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 294.0bn85.8% of capital
    Total debtUSD 48.8bn14.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.65%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 155.83

    80% of EV

    Forecast FCFF, final year
    USD 16.1bn
    Capex at depreciation, working capital in reinvestment
    USD 17.6bn
    Less reinvestment at g/ROIC (8.5% of NOPAT)
    USD -1.5bn
    Capitalised
    USD 16.1bn
    ROIC (reported)
    29.3%
    Terminal value, undiscounted
    USD 320.4bn
    Terminal value, discounted
    USD 230.0bn
    Enterprise value
    USD 286.8bn
    Less net debt
    USD 44.0bn
    Equity value
    USD 242.8bn

    Exit at 20.0x EBITDA

    Value per shareUSD 237.16

    86% of EV

    Terminal value, undiscounted
    USD 497.0bn
    Terminal value, discounted
    USD 356.7bn
    Enterprise value
    USD 413.5bn
    Less net debt
    USD 44.0bn
    Equity value
    USD 369.5bn

    Spread between methods: 41%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.65%214.68239.63272.46317.60383.64
    6.65%167.21181.90200.09223.23253.65
    7.65%135.20144.62155.83169.43186.27
    8.65%112.16118.56125.97134.67145.04
    9.65%94.8099.33104.47110.37117.21

    Outlined: this model. Green text: above today's price of 188.62. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year8.6%12.7%+4.1pp
    EBIT margin36.4%42.7%+6.4pp
    Discount rate7.7%6.9%-0.8pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.