Philip Morris International Inc.PMNYSE
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DCF Valuation

DCF Valuation Summary
Strong Buy
Fair Value: $237.02 per share(market-calibrated)
+32.6%
Upside to Fair Value
Current
$178.78
Pure Model
$252.63
Fair Value
$237.02
Bull Case
$313.93
Bear Case
$201.52
Market Reality Check
Model Terminal Growth
2.50%
Market-Implied Growth
0.50%
Calibrated Growth
2.00%
Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $252.63.
What's Driving This Ratingfor PM
CapEx normalizing toward maintenance
Historical CapEx is 3.03% of revenue (heavy investment phase). Model fades this to 3.00% by Year 10, freeing up ~$20M in annual FCF. This is the biggest driver of long-term cash flow improvement.
Premium margins already priced in
EBIT margin of 37.76% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.
Moderate revenue growth
Analyst consensus projects 7.80% revenue growth, fading to 2.50% by Year 10. Revenue reaches $58.1B (vs $40.6B today).
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Market pricing in lower growth than model
The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.
Strong cash flow conversion
Year 10 FCF/EBITDA conversion of 75.21% indicates efficient cash generation. FCF reaches $18.1B by Year 10 (31.09% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)0.41
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)6.34%
Cost of Debt
Pre-tax Cost of Debt2.49%
Tax Rate18.54%
After-tax Cost of Debt2.03%
Equity Weight (E/V)84.63%
Debt Weight (D/V)15.37%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (84.63% × 6.34%) + (15.37% × 2.03%)
= 5.68%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
YearYear 1Year 3Year 5Year 7Year 10
Revenue$43.8B$49.9B$51.3B$53.9B$58.1B
EBIT$16.5B$18.8B$19.4B$20.4B$21.9B
Tax$3.1B$3.5B$3.6B$3.8B$4.1B
NOPAT$13.5B$15.3B$15.8B$16.6B$17.9B
+ Depreciation$1.6B$1.8B$1.8B$1.9B$2.1B
- Capex$1.3B$1.5B$1.5B$1.6B$1.7B
- Δ NWC$317M$350M$125M$132M$142M
Free Cash Flow$13.4B$15.3B$15.9B$16.8B$18.1B
Discount Factor0.9460.8470.7590.6790.576
Present Value$12.7B$12.9B$12.1B$11.4B$10.4B
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$18.1B
Terminal Growth Rate2.50%
WACC5.68%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$582.2B
PV of Terminal Value$335.1B
Exit Multiple Method
Year 10 EBITDA$24.0B
Exit Multiple (EV/EBITDA)20.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$480.0B
PV of Terminal Value$276.3B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$118.3B
PV of Terminal Value$335.1B
Enterprise Value$453.4B
(-) Net Debt$44.0B
Equity Value$409.4B
Shares Outstanding1.5B
Price per Share$272.17
Exit Multiple Method
PV of Projected FCFs$118.3B
PV of Terminal Value$276.3B
Enterprise Value$394.6B
(-) Net Debt$44.0B
Equity Value$350.6B
Shares Outstanding1.5B
Price per Share$233.08
Pure Model Fair Value
$252.63
Average of perpetuity growth and exit multiple methods (before market calibration)
Sensitivity AnalysisPrice per Share
WACC ↓ / Growth →1.50%2.00%2.50%3.00%3.50%
3.68%$363.89$370.96$355.01$339.80$325.30
4.68%$275.79$299.14$333.21$339.80$325.30
5.68%$225.14$237.02$252.63$274.06$305.34
6.68%$190.80$197.72$206.30$217.21$231.55
7.68%$165.25$169.65$174.89$181.25$189.14
How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.
Scenario Analysis
Bear Case
$201.52
12.7% vs current
  • -25% vs analyst consensus
  • Terminal growth: 2.0%
  • Beta: 0.51
Base Case
$252.63
41.3% vs current
  • Analyst consensus
  • Terminal growth: 2.5%
  • Beta: 0.41
Bull Case
$313.93
75.6% vs current
  • +25% vs analyst consensus
  • Terminal growth: 3.0%
  • Beta: 0.35
Key Assumptions & DriversConsumer Defensive Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth7.80%
Year 3 Revenue Growth7.54%
Year 5 Revenue Growth2.50%
Year 7 Revenue Growth2.50%
Year 10 Revenue Growth2.50%
Terminal Growth Rate2.50%
Margin & Efficiency
Current EBIT Margin37.76%
Tax Rate18.54%
Historical Capex / Rev3.03%
Terminal Capex / Rev3.00%
NWC / Revenue10.00%
Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.
Institutional-Grade Methodology
Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta
Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Defensive sector)
This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.