Philip Morris International Inc. (NYSE:PM) has turned a shrinking cigarette business into a growth story. At about $187 a share and $292 billion in value, PM trades near 27 times earnings, a staples-growth multiple, roughly triple what traditional cigarette makers fetch. At this price, investors are betting that smoke-free products keep growing fast enough to earn that premium, rather than paying for a slowly shrinking tobacco company in disguise.
The Re-Rating Math
What led to this high multiple? Smoke-free products, mainly Zyn nicotine pouches and IQOS heated tobacco, now make up more than 40% of PM’s revenue, up from a sliver a few years ago. They carry higher margins and less stigma than cigarettes. IQOS keeps gaining share in Europe and Japan and recently passed Marlboro in revenue inside the company. Zyn shipments in the US have surged, though their growth can be uneven from quarter to quarter. And at 27 times earnings, the price assumes smoke-free growth keeps outrunning the still-declining cigarette business for years. The combustible side still funds the pivot through steady price increases, but the premium rests on the new products.
Not every staple gets paid like a growth stock, though. One dividend payer with a 21-year raise streak still trades at just 11 times forward earnings, and here’s why that discount may not last.
The Bull Case
To the bulls, the transformation is real and already large, with smoke-free products accounting for 40% of revenue and climbing. Zyn and IQOS are higher-margin and face less of the stigma and heavy regulation that hammered cigarettes. Recent FDA clearances, including rare “modified risk” authorizations for Zyn and IQOS, lower the US regulatory hurdle, thereby widening the runway. Meanwhile, the old cigarette business still throws off cash and pricing power to fund the shift. It also helps with the growing dividend, now yielding about 3.4%.
The Bear Case
The bears say regulation can turn on the very products driving the story. The FDA could tighten flavor or nicotine rules, and governments abroad are weighing pouch and vape restrictions, with youth-use scrutiny never far away. A single adverse ruling could stall Zyn or IQOS. Competition is also on the rise. British American Tobacco and others chase the pouch market, which may cap pricing. The cigarette base keeps shrinking as well. At 27 times earnings, any slowdown in smoke-free growth or a regulatory setback could de-rate the stock fast.
The Bottom Line
The question to focus on: does smoke-free growth stay durable, and regulation stay benign enough to keep Philip Morris International Inc. growing? For the bulls, Zyn and IQOS are the draw, if the momentum holds and the rules stay favorable. For the bears, 27 times is reasonable only if the transformation keeps compounding. And an income investor gets a dependable 3.4% yield with a long record of increases.
PM’s streak only dates to its 2008 spin-off, though. Income investors who want 50-plus years of raises should see the 10 best Dividend Kings hedge funds are buying.
Market Sentiment
According to Insider Monkey’s database, 76 hedge funds held Philip Morris at the end of the second quarter of 2026, down slightly from 78 the quarter before. The value of those combined holdings held is roughly $12.6 billion. Hedge funds trimmed PM slightly, but billionaires were quietly loading up elsewhere in income stocks. See the two Dividend Kings they love.
READ NEXT: Intuitive Surgical (ISRG): Is Its Robotic-Surgery Moat Still Untouchable? and Chipotle (CMG): Is the Growth Runway Still Long Enough to Justify the Premium?
This article is originally published at Insider Monkey.
Hedge Fund Resource Center