Philip Morris' Valuation Looks Overstretched: Time to Hit Pause?

Philip Morris International Inc. PM has impressed investors with its bold pivot toward reduced-risk products (RRPs), led by the success of its IQOS platform. This transformation has positioned the company as a future-ready tobacco leader. However, after a strong rally in the first half of 2025, concerns around its valuation are growing.

Philip Morris currently trades at a forward P/E ratio of 22.89x — significantly above both its five-year average of 15.34x and the broader tobacco industry’s current ratio of 15.36. This premium valuation reflects strong bullish sentiment around its smoke-free future, but it also suggests much of that optimism is already priced in. With a Value Score of C, the stock appears less attractive from a pure valuation standpoint.

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While Philip Morris’ long-term vision remains promising, near-term risks persist. Revenue growth is steady but not spectacular, and the company faces currency headwinds, regulatory tightening and geopolitical uncertainty in key international markets. Its heavy reinvestment in next-generation products may strain cash flow and limit dividend growth in the near term.

That said, Philip Morris isn’t necessarily a “sell.” The company’s fundamentals remain solid, and its leadership in the RRP space is undeniable. However, at current levels, it may be wise for investors to wait for a more favorable entry point.

Other Tobacco Stocks to Watch While You Wait on PM

If Philip Morris feels overvalued, investors may find better value in Altria Group, Inc. MO and British American Tobacco p.l.c. BTI — both trading at attractive valuations in 2025.

Altria, with a P/E ratio of 10.76x, continues to demonstrate resilience amid declining cigarette volumes, thanks to strong pricing power and a growing focus on smoke-free products. Altria’s “Optimize & Accelerate” initiative is designed to modernize operations and accelerate its transition to a smoke-free future, backed by solid dividends and reliable cash flow.

British American Tobacco, trading at 10.33x, is also evolving. With its goal to build a smokeless world, British American Tobacco is investing heavily in reduced-risk products. It aims to reach 50 million users of non-combustible products by 2030 and derive 50% of revenues from them by 2035.

PM’s Price Performance & Estimates

Shares of Philip Morris have rallied 50.1% year to date compared with the industry’s growth of 37.6%.

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The Zacks Consensus Estimate for PM’s 2025 earnings implies year-over-year growth of 13.7%, whereas its 2026 earnings estimate suggests a year-over-year uptick of 11.7%. The estimates for 2025 and 2026 have remained unchanged in the past 30 days.

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PM stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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