Philip Morris International Inc.PMNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Buy

Fair Value: $236.53 per share(market-calibrated)

+28.7%

Upside to Fair Value

Current

$183.82

Pure Model

$251.73

Fair Value

$236.53

Bull Case

$313.93

Bear Case

$200.89

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.54%

Calibrated Growth

2.01%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $251.73.

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).

🎯

Market pricing in lower growth than model

The market implies only 0.54% perpetual growth — 196bps 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)84.99%

Debt Weight (D/V)15.01%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (84.99% × 6.34%) + (15.01% × 2.03%)

= 5.69%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 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 Factor	0.946	0.847	0.758	0.679	0.575
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%

WACC5.69%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$579.3B

PV of Terminal Value$333.0B

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$275.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$118.2B

PV of Terminal Value$333.0B

Enterprise Value$451.2B

(-) Net Debt$44.0B

Equity Value$407.2B

Shares Outstanding1.5B

Price per Share$270.71

Exit Multiple Method

PV of Projected FCFs$118.2B

PV of Terminal Value$275.9B

Enterprise Value$394.1B

(-) Net Debt$44.0B

Equity Value$350.1B

Shares Outstanding1.5B

Price per Share$232.76

Pure Model Fair Value

$251.73

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%
3.69%	$361.99	$370.96	$355.01	$339.80	$325.30
4.69%	$274.81	$297.89	$331.48	$339.80	$325.30
5.69%	$224.52	$236.28	$251.73	$272.91	$303.75
6.69%	$190.36	$197.22	$205.73	$216.54	$230.73
7.69%	$164.91	$169.27	$174.48	$180.79	$188.62

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

$200.89

9.3% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.51

Base Case

$251.73

36.9% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.41

Bull Case

$313.93

70.8% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.35

Key Assumptions & Drivers• Consumer 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.

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