Philip Morris International Inc.'s (NYSE:PM) price-to-earnings (or "P/E") ratio of 19.8x might make it look like a sell right now compared to the market in the United States, where around half of the companies have P/E ratios below 16x and even P/E's below 9x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.
Philip Morris International has been struggling lately as its earnings have declined faster than most other companies. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Philip Morris International.
How Is Philip Morris International's Growth Trending?
The only time you'd be truly comfortable seeing a P/E as high as Philip Morris International's is when the company's growth is on track to outshine the market.
Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 8.7%. As a result, earnings from three years ago have also fallen 7.7% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.
Looking ahead now, EPS is anticipated to climb by 13% per annum during the coming three years according to the twelve analysts following the company. That's shaping up to be materially higher than the 10% per annum growth forecast for the broader market.
In light of this, it's understandable that Philip Morris International's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.
The Key Takeaway
Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
As we suspected, our examination of Philip Morris International's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.
And what about other risks? Every company has them, and we've spotted 3 warning signs for Philip Morris International (of which 1 is a bit unpleasant!) you should know about.
Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
Philip Morris Internationalは、他の多くの企業よりも収益の減少が速かったため、最近は苦戦しています。不振な収益実績が大幅に回復すると多くの人が期待していることが、P/E比率の崩壊を防いでいます。それができない場合は、既存の株主は株価の持続可能性に非常に不安を感じるかもしれません。
Philip Morris Internationalのアナリスト予測を調べた結果、同社が優れた収益見通しを持っていることが、同社の高いP/E比率に寄与していることがわかりました。現時点では、株主は将来の収益に懸念がないと非常に自信を持っており、高いP/E比率にも快適に対応できています。これらの状況が変わらない限り、同社は株価を強力に支援し続けることになるでしょう。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。