What’s Driving Growth For Altria Stock?
Altria stock (NYSE: MO) saw a 5% fall last year, faring better than the broader S&P500 index, which was down 20%. Looking at the longer term, MO stock is up 11% from levels seen in late 2020, slightly outperforming the S&P 500 index, up about 2%.
This 11% growth for MO stock since late 2020 can primarily be attributed to 1. the company’s P/S ratio rising 16% to 3.4x trailing revenues now, vs 2.9x in 2020, partly offset by 2. Altria’s revenue declining 3.5% to $25.2 billion over the last twelve months, compared to $26.2 billion in 2020, and 3. a 0.7% rise in its average total shares outstanding to 1.9 billion. Our dashboard on Why Altria Stock Moved has more details.
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Altria sells its tobacco products in the U.S. markets. Revenue is generated from the sale of smokable and smokeless products. Due to supply disruptions, the company’s revenue growth was impacted during the pandemic. Altria sold its wine business for $1.2 billion last year, with an increased focus on smoking and smokeless products.
However, with higher inflation, the company sees a decline in cigarette volume, a trend expected to continue in the near term. For perspective, the volume of the smokable products declined 8.9% to 66.3 million sticks for the nine months ending Sep 2022. That said, pricing growth is helping the company offset some of the revenue loss from volume. Altria has also expanded its operating margins slightly to 27.6% now, vs. 26.3% in 2020. Our Altria Operating Income dashboard has more details.
We estimate Altria’s Valuation to be around $52 per share, which is 14% above the current market price of $46. This represents a 10x P/E multiple based on forward EPS estimate of $5.11 in 2023, aligning with its last three-year average of 10x, implying that MO stock has some room for growth.
While MO stock looks like it has some room for growth, it is helpful to see how Altria’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Furthermore, the Covid-19 crisis has created many pricing discontinuities, which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Ecolab vs. Philip Morris.
What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.
| Returns | Jan 2023 MTD [1] |
2023 YTD [1] |
2017-23 Total [2] |
| MO Return | 0% | 0% | -33% |
| S&P 500 Return | 0% | 0% | 71% |
| Trefis Multi-Strategy Portfolio | 0% | 0% | 214% |
[1] Month-to-date and year-to-date as of 1/4/2023
[2] Cumulative total returns since the end of 2016
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