Philip Morris International Inc. (PM): Has This Company Now Become the Perfect Stock?

Investors have traditionally seen Philip Morris International Inc. (NYSE:PM) as a way to get exposure to the lucrative tobacco market without the hassles of regulation and legal liability that have plagued its domestically focused peers. In the U.S., the long-term smoking trend has been unmistakably downward, and U.S. tobacco companies have suffered from weaker sales volumes and increasing pressures on overall revenue. Altria Group Inc (NYSE:MO) and Reynolds American, Inc. (NYSE:RAI) have had to let part of their respective workforces go in light of the weakness in the industry.

By comparison, Philip Morris offers growth opportunities around the world, including in many markets where regulation is much less strict, and smoking remains more prevalent. Yet, even abroad, regulatory efforts are starting to pick up steam, as Australia clamps down on cigarette makers with strict packaging guidelines. Many other countries are looking at adopting the Australian model if it proves successful.

Another thing that has hurt Philip Morris is the strong dollar. With its revenue coming in the form of foreign currency, the company has to translate its cash back into U.S. dollars for reporting purposes; when the dollar is strong, its foreign revenue becomes worth fewer dollars, hurting growth.

For Philip Morris International Inc. (NYSE:PM) to improve, it needs to get its shareholder equity back into positive territory and work on growing its earnings to catch up to its pricey valuation. If global regulation rises, though, Philip Morris will have a hard time becoming a perfect stock.

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The article Has Philip Morris International Become the Perfect Stock? originally appeared on Fool.com is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of Philip Morris International.

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