Should You Rethink Philip Morris After a 9% Dip and New Smoke-Free Push?

If you are scratching your head over what to do with Philip Morris International, you are not alone. The stock has had quite a run this year, but the last month has been a different story. After climbing an impressive 23.7% year-to-date and surging 18.1% over the past year, shares have dipped 9.1% in the last 30 days. Even so, when you zoom out, the long-term growth is hard to ignore with a 167.1% return over five years. What has really caught investors’ attention lately is Philip Morris’s ongoing push into smoke-free products and innovative alternatives, which has added a new layer of intrigue to its growth story. With increased attention around regulations and product launches, market watchers see both upside potential and some shifts in risk sentiment.

When considering if now is a good time to buy, hold, or sell, we have to ask whether Philip Morris is genuinely undervalued or if the recent dip is justified by changes to its fundamentals. A quick scan of the valuation scorecard reveals a value score of 4 out of 6, meaning the company is considered undervalued on four key metrics. That is not something you see every day, and it calls for a deeper dive into what is driving that assessment.

Next, we will break down the main valuation methods, walking through how Philip Morris stacks up and where the numbers might surprise you. Stay with me, because after that, I will explain what could be the single best way to size up the company’s true value.

Why Philip Morris International is lagging behind its peers

Approach 1: Philip Morris International Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's true value by projecting future free cash flows and discounting them to today's dollars. Think of it as looking ahead at the money Philip Morris International might generate, then working out what that future stream is worth right now.

Based on the 2 Stage Free Cash Flow to Equity DCF, Philip Morris International reported free cash flow of $10.01 billion over the last twelve months. Analysts forecast strong growth, with estimates reaching $13.1 billion in 2026 and rising to $16.3 billion by 2029. Beyond this, projections up to 2035 suggest further steady growth. Direct analyst estimates are not available past 2029, and Simply Wall St extrapolates beyond that point.

All these projected billions are run through the model to estimate an intrinsic value per share. For Philip Morris International, the DCF analysis produces a fair value of $201.54 per share, signifying the stock trades at a 25.7% discount to its calculated intrinsic worth. This means, according to these calculations, the market price is noticeably below what the business fundamentals suggest it could be worth.

Story Continues

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Philip Morris International.PM Discounted Cash Flow as at Oct 2025

Our Discounted Cash Flow (DCF) analysis suggests Philip Morris International is undervalued by 25.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Philip Morris International Price vs Earnings (PE)

The price-to-earnings (PE) ratio is a widely used valuation metric for established, profitable companies like Philip Morris International. It allows investors to see how much they are paying for each dollar of current earnings, making it particularly useful when comparing mature companies with a predictable earnings stream.

A company’s “normal” or “fair” PE ratio is not just a matter of looking at profit alone. Growth prospects, perceived risks, consistency of earnings, and even market mood all play critical roles. Faster-growing or lower-risk businesses often justify higher multiples, while companies facing uncertainty or industry challenges usually warrant a discount.

Right now, Philip Morris International trades on a PE ratio of 27.1x. To put this in context, the tobacco industry’s average PE ratio is just 14.8x, and the average among similar peers sits at 19.0x. On the surface, this suggests that the market values Philip Morris well above its industry and peer group, possibly pricing in stronger growth or lower risk.

This is where the Simply Wall St Fair Ratio comes in. This proprietary benchmark adjusts for not only industry and market cap, but also growth outlook, profit margins, and company-specific risk factors. The Fair Ratio for Philip Morris is currently set at 29.7x, which gives a more tailored and nuanced benchmark than the industry or peer averages could provide.

Comparing the Fair Ratio to Philip Morris's actual PE, the gap is minimal. With a ratio of 27.1x versus a fair value of 29.7x, the difference is well within the margin of judgment. This suggests the stock is trading at about the right price relative to its earnings and outlook.

Result: ABOUT RIGHTNYSE:PM PE Ratio as at Oct 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Philip Morris International Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your investment story for a company, a way to connect your beliefs about its future with a financial forecast and then see how your story stacks up in terms of fair value. Rather than just looking at numbers, Narratives let you bring together your own expectations for Philip Morris International’s sales, margins, and risks, and instantly see the fair price those assumptions imply.

This approach makes decision-making more tangible because it bridges the company’s story with the underlying math. Narratives are available, free and user-friendly, on the Simply Wall St Community page, where millions of investors use them to refine their buy, hold, or sell decisions. By letting you compare your calculated Fair Value with the current Price, Narratives help you see in real time if your outlook signals that the stock is undervalued or not.

Even better, these Narratives update automatically as new information, such as company news or earnings, hits the market, so your perspective is always current. For example, on Philip Morris International, some investors hold a bullish Narrative with a target as high as $220, reflecting optimism around emerging market growth, while others are more cautious, seeing Fair Value closer to $153 due to ongoing regulatory risks.

Do you think there's more to the story for Philip Morris International? Create your own Narrative to let the Community know!NYSE:PM Community Fair Values as at Oct 2025

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include PM.

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