Should You Still Buy Marlboro Owner Altria (MO)?

Back in June, I showed you 3 Stocks To Depression Proof Your Portfolio.

Today, I want to give you an update on Marlboro cigarette owner Altria (MO) to tell you whether you should buy it or not after its most recent earnings.

Here’s a brief recap of what I said then it before we get to today’s article…

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Altria

Here’s another company that will benefit you no matter what the world’s economy is doing.

Another thing people won’t stop during a depression is smoking.

  1. Because they can’t due to the addictive nature of tobacco of course.
  2. Because most smokers also like smoking.

Because of these things, cigarette companies will also benefit no matter the economic situation.

And Altria is the biggest and best.

Altria is the owner of some of the most powerful tobacco brands in the world: Marlboro, Copenhagen, Skoal, and Black & Mild as just a few examples.

Marlboro is the 23rd largest/most recognized individual brand in the world. And this brand alone owns 43% of cigarette market share.

How large is that?

The Marlboro brand is larger than the next 8 largest cigarette brands combined.

Over the last 10 years it averaged an operating profit margin of an enormous 44.6% per year. I look for any company to produce above 10% margins on a consistent basis to consider as an investment.

And its FCF/Sales margin averaged 26% per year… I look for anything above 5% on a consistent basis to consider an investment.

Altria crushes my threshold on both important metrics… These are important because they show Altria produces profits and cash to continue funding operations and growth.

And as of today, it pays you a 9.23% dividend today just to own its shares.

Look at Altria if you’re looking for an ultra-safe investment to survive and thrive during a depression type scenario.

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This thesis to buy Altria continued to play out after it released its most up to date earnings on October 30th, 2020.

  • Sales rose 3.9% in the year to year quarterly period to $7.1 billion.
  • Sales in the first 9 months of 2020 rose 3.9% to $19.9 billion.
  • Earnings per share improve 63.3% to negative $0.51 per share.
  • Earnings per share through the first 9 months of 2020 are up 404% to $1.36 per share.
  • Operating income for the first 9 months of 2020 rose 5.1% to $8.5 billion.
  • And operating income rose 7.8% in the year to year quarterly period to $3.3 billion.

This is a stellar quarter during one of the worst economic situations we’ve seen in our lifetimes.

And proves exactly why I named Altria one of the best stocks to Depression Proof your Portfolio back in June.

But is it cheap and buyable right now?

Unfortunately, no.

Its P/E is 95.9.

Its P/CF is 8.3.

Its forward P/E is 8.3.

And its enterprise value to operating income – EV/EBIT is 21.7.

On all three metrics at the top I look to buy investments below 20 to consider them undervalued.

And on EV/EBIT I look to buy stocks below 8.

These show that Altria is overvalued right now.

And this means buying its stock does not give you a margin of safety in investing terminology.

When you invest in stocks that have a margin of safety it makes the investment safer.  And it also means you should expect to earn higher returns owning it in the coming years.

The inverse of this is also true…

When you invest in a stock without a margin of safety it makes the investment riskier.  And it also means you should expect to earn less owning stock going forward.

With Altria being overvalued it makes the investment riskier.

Should You Own Altria (MO) After Its Strong Earnings?

Even though it produced fantastic quarterly results Altria is massively overvalued right now.

For this reason, I recommend holding off on buying its stock.

If you’re looking for a solid, safe, stable, huge dividend paying, and enormously profitable investment to buy to Depression Proof Your Portfolio – consider investing in Altria…

But only when it’s cheaper.

Click here to see some of the stocks we recommend to Depression Proof Your Portfolio.

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

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