Philip Morris has generally followed the market’s trajectory over the past six months. The stock has climbed by 5.1% to $174.72 per share while the S&P 500 was flat.
Is PM a buy right now? Find out in our full research report, it’s free.
Why Are We Positive On PM?
Founded in 1847, Philip Morris International (NYSE: PM) manufactures and sells a wide range of tobacco and nicotine-containing products, including cigarettes, heated tobacco products, and oral nicotine pouches.
1. Rising Sales Volumes Show Elevated Demand
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
Philip Morris’s average quarterly volume growth was a healthy 3% over the last two years. This is pleasing because it shows consumers are purchasing more of its products. 
2. Elite Gross Margin Powers Best-In-Class Business Model
All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.
Philip Morris has best-in-class unit economics for a consumer staples company, enabling it to invest in areas such as marketing and talent. As you can see below, it averaged an elite 66% gross margin over the last two years. That means Philip Morris only paid its suppliers $34.00 for every $100 in revenue. 
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Philip Morris has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 27.3% over the last two years.
Final Judgment
These are just a few reasons why Philip Morris ranks highly on our list, but at $174.72 per share (or 20.6× forward P/E), is now the right time to buy the stock? See for yourself in our comprehensive research report, it’s free.
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