Philip Morris Offers An Impressive Revenue Growth

Source from:  Tobacco World  09/26/2012

Philip Morris (PM) is one of the largest tobacco companies in the world. The company produces 7 of the top 15 international brands, including Marlboro, which is number one worldwide cigarette. Philip Morris sells its products in nearly 180 countries. In late 2011, the company held approximately 16.0% share of total world cigarette market outside the U.S., or 28.1% excluding the People"s Republic of China and the U.S. In my previous article, I talked about the dividend stability Philip Morris, where I looked at the earnings, cash flow and balance sheet. In this article, I calculated the profitability, leverage and cash flow metrics that can show trends in the financial position of the company in the last three years. Over the past three years the company has improved its profitability. All measures indicate positive trends in the company"s earnings. For three years, the company was able to increase its gross profit by almost 1%. Overall the global economy was in turmoil over the past four years, still firm could increase its profits. The tobacco industry is a mature industry, where the achievement of heavy fields or a significant increase in margin can be a difficult task. However, the company was able to increase its operating profit by 1.29%, and profit before tax margin at 1.52%. In addition, the net profit margin also showed a positive trend and currently stands at 11.63% compared to 10.55% at the end of 2009. In addition, ROA for the company jumped by 6.06% over the previous three years. In general, Philip Morris shows healthy trends in profitability and stable field. In order to assess the situation leverage firm, I used four relations. Over the past three years the debt as a ratio of total assets increases gradually. At the moment, the debt as a ratio of total assets was 52.26%. There has been an increase of more than $ 3 billion in total debt of the company, while total assets increased by only $ 936 million. However, the increase in the capitalization ratio is associated with a decrease in the total capital of the company. Philip Morris was the repurchase of shares gradually over the past three years, the company bought back shares worth almost $ 16 billion. Interest coverage ratio is exceptionally strong for Philip Morris, and it should not have any problem with the payment of principal and interest obligations. In addition, the company generates cash flow for more than half of its debt, as specified ratio. In general, I believe that the company can easily cope with its debt levels and should not have any problem covering interest expenses. Philip Morris creates a healthy cash flow in 2011; operating cash flow for the company was more than $ 10 billion. Operating cash flow in the Philip Morris sales ratio increased to 1.09% compared from the levels in 2009 Free cash flow ratio of more than 90% indicated that the firm does not invest a lot of capital expenditures. In fact, the company had less than one billion dollars in capital expenditures in each of the previous three years. Capital expenditures increased from $ 715 million in 2009 to $ 897 million in 2011. As a result of high operating cash flow and low capital costs, capital expenditure ratio is quite high. In addition, dividend coverage and dividend combined with CAPEX show that the company generates enough cash flow to meet their needs of dividends and capital expenditures. Summary: Almost all measures indicate that the company is on the right path, and the profitability of the company improves. While some of the more mature markets, companies are experiencing lower demand for cigarettes; I expect that the Asian operations of the company will continue to lead the company towards future growth. There is still room for growth in the emerging economies. Strong financial position should be created Philip Morris"s nice to use these opportunities for growth. Although I think Phillip Morris is a bit overpriced at the moment, the stock offers a solid growth opportunity. Enditem