Is Altria Group, Inc. (NYSE:MO) Currently Priced 41% Below Its Value?
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Aug 31 2025
0mins
Should l Buy MO?
Source: Yahoo Finance
Altria Group Valuation Analysis
- Fair Value Estimate: Altria Group's fair value is estimated at US$114, indicating a significant undervaluation of 41% compared to its current share price of US$67.21.
- Analyst Price Target: The average analyst price target for Altria is US$62.88, which is 45% lower than the fair value estimate.
Discounted Cash Flow (DCF) Model
- Methodology: The analysis employs a two-stage DCF model, which accounts for an initial high growth phase followed by a steady growth period. Future cash flows are estimated and discounted to present value.
- Projected Cash Flows: Expected levered free cash flows (FCF) from 2026 to 2035 are projected to grow from US$8.97 billion to US$11.5 billion, with growth rates gradually increasing from 1.70% to 2.85%.
- Present Value Calculation: The present value of the 10-year cash flows totals approximately US$69 billion, discounted at a rate of 7.7%.
Terminal Value and Total Equity Value
- Terminal Value Calculation: The terminal value is calculated at US$256 billion, using a conservative growth rate of 3.1% based on the 5-year average of the 10-year government bond yield.
- Total Equity Value: The total equity value, combining the present value of cash flows and terminal value, is estimated at US$191 billion, leading to a per-share valuation that suggests the stock is undervalued.
Financial Strengths and Weaknesses
- Strengths: Altria's earnings and cash flows adequately cover its debt and dividends, placing it in the top 25% of dividend payers in the market.
- Weaknesses: The company has experienced a decline in earnings over the past year, and total liabilities exceed total assets, raising financial distress concerns.
Future Outlook and Risks
- Growth Forecast: Annual earnings are expected to grow over the next three years, although at a slower rate compared to the broader American market.
- Investment Considerations: The analysis emphasizes that valuation is just one aspect of investment decisions, and potential investors should consider risks, future earnings growth, and alternative investment opportunities.
Conclusion
- Valuation Limitations: The DCF model is not foolproof and should be used to test assumptions rather than provide definitive valuations. Changes in growth rates or cost of equity can significantly alter outcomes.
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Analyst Views on MO
Wall Street analysts forecast MO stock price to fall
8 Analyst Rating
4 Buy
3 Hold
1 Sell
Moderate Buy
Current: 68.980
Low
57.00
Averages
65.00
High
72.00
Current: 68.980
Low
57.00
Averages
65.00
High
72.00
About MO
Altria Group, Inc. operates a portfolio of tobacco products for United States tobacco consumers aged 21+. Its segments include smokeable products and oral tobacco products. The smokeable products segment consists of combustible cigarettes and machine-made large cigars. The oral tobacco products segment includes moist smokeless tobacco (MST) products and oral nicotine pouches. Its wholly owned subsidiaries include manufacturers of both combustible and smoke-free products. In combustibles, it owns Philip Morris USA Inc. (PM USA), and John Middleton Co. (Middleton), which are cigarette manufacturers. Its smoke-free portfolio includes ownership of U.S. Smokeless Tobacco Company LLC (USSTC), a global MST manufacturer, Helix Innovations LLC (Helix), a manufacturer of oral nicotine pouches, and NJOY, LLC (NJOY), an e-vapor manufacturer with a commercialized product portfolio. The brand portfolios of its operating companies include Marlboro, Black & Mild, Copenhagen, Skoal, on! and NJOY.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Growth Potential for Altria Group: Altria Group's stock price stands at $68.86, boasting a total return of 126.6% over the past five years, significantly outperforming the S&P 500's 89.1%; if Altria breaks into the non-cigarette tobacco and nicotine market, its shares could see substantial valuation expansion, currently trading at only 12 times forward earnings, indicating strong upside potential.
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- Altria's Business Challenges: Altria (NYSE: MO) is experiencing ongoing declines in cigarette demand, with a 10% drop in volumes in 2025; despite using price hikes and stock buybacks to support revenue and earnings, its core business remains fundamentally challenged, impacting investor confidence.
- Hormel Foods' Strategic Shift: Hormel Foods (NYSE: HRL) is focusing on cost control and portfolio overhaul, announcing plans to sell its whole turkey business to concentrate on branded food products rather than commodity items, demonstrating its adaptability to current consumer trends.
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- Market Performance Comparison: Since February 2021, Altria's total return has reached 128.6%, far exceeding the S&P 500's 85.8% and outperforming Coca-Cola and Procter & Gamble, showcasing its strong performance in the consumer goods sector despite challenges in industry innovation.
- Dependence on Tobacco Products: While Altria generates around 88% of its revenue from smokeable products, its competitor Philip Morris International has successfully derived 41.5% of its revenue from smoke-free products, highlighting Altria's lag in adapting to market changes, which could impact future growth potential.
- Future Growth Potential: Altria is expected to continue offsetting declining cigarette volumes through price increases, and if it can successfully launch smokeless products, it could significantly enhance its valuation, with a current price-to-earnings ratio of only 12 times, indicating its attractiveness as a long-term investment.
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- Growth Potential for Altria Group: Altria Group's stock price stands at $68.86, boasting a total return of 126.6% over the past five years, significantly outperforming the S&P 500's 89.1%; if Altria breaks into the non-cigarette tobacco and nicotine market, its shares could see substantial valuation expansion, currently trading at only 12 times forward earnings, indicating strong upside potential.
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See More
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- Safety of Consumer Staples: The consumer staples sector is viewed as a safe haven due to its provision of essential products, ensuring that consumers will continue to purchase food and household items even during economic downturns, highlighting its importance amid market volatility.
- Risks of High-Yield Stocks: While Altria's high yield is appealing, its declining sales present fundamental concerns that could negatively impact dividends, necessitating careful evaluation of its long-term sustainability by investors.
- Strong Brand Support: General Mills boasts a 5.4% dividend yield supported by ongoing investments in brand leadership and innovation; despite management lowering full-year earnings guidance, its 127-year history of uninterrupted dividends bolsters long-term investor confidence.
- Seizing Investment Opportunities: With Hormel and Clorox yielding 4.8% and 4% respectively, both companies excel in brand ownership and product innovation, and the current price weakness presents a favorable opportunity for long-term investors to buy at attractive prices.
See More
Comparison of Altria and Hormel Foods' Yields
- Altria's Yield Appeal: Altria boasts a high dividend yield of 6.3%, yet its core tobacco business is experiencing a steady decline in sales, with a 10% drop in 2025; however, price hikes and stock buybacks have supported revenue and earnings, making it attractive for high-yield investors despite inherent risks.
- Hormel's Transformation Plan: Hormel Foods offers a yield of approximately 5%, and while it faces challenges with rising costs, the company is focusing on selling its turkey business to concentrate on branded food products, aiming to enhance profitability and align with consumer trends, indicating a positive transformation strategy.
- Management Change Impact: The appointment of interim CEO Jeff Ettinger marks a significant strategic shift for Hormel, under his leadership, the company has achieved five consecutive quarters of organic sales growth, suggesting that it is moving in the right direction towards recovery.
- Dividend Stability Comparison: Although Altria's dividend is more attractive, Hormel Foods, recognized as a
See More
Comparing Yields: Altria vs. Hormel Foods
- Altria's Yield Appeal: Altria boasts a high dividend yield of 6.3%, yet its core cigarette business is facing fundamental challenges, with sales volumes declining by 10% in 2025, raising concerns about sustainability.
- Hormel's Turnaround Strategy: Hormel Foods offers a 5% yield and is addressing rising cost pressures by selling its whole turkey business to focus on branded food products, aligning better with current consumer trends and enhancing profitability.
- Management Changes Impact: The appointment of interim CEO Jeff Ettinger signifies a strategic shift for Hormel, under which the company has achieved five consecutive quarters of organic sales growth, indicating a positive trajectory for future performance.
- Dividend King Advantage: With over 50 years of annual dividend increases, Hormel is recognized as a Dividend King, demonstrating a strong commitment to returning value to investors, making it a more attractive option compared to Altria in terms of risk/reward profile.
See More
Comparative Investment Analysis: Altria vs. Hormel Foods
- Altria's Business Challenges: Altria (NYSE: MO) is experiencing ongoing declines in cigarette demand, with a 10% drop in volumes in 2025; despite using price hikes and stock buybacks to support revenue and earnings, its core business remains fundamentally challenged, impacting investor confidence.
- Hormel Foods' Strategic Shift: Hormel Foods (NYSE: HRL) is focusing on cost control and portfolio overhaul, announcing plans to sell its whole turkey business to concentrate on branded food products rather than commodity items, demonstrating its adaptability to current consumer trends.
- Dividend Performance Comparison: While Altria offers a high dividend yield of 6.3%, Hormel's 5% yield, though lower, is backed by over 50 years of annual dividend increases, earning it the title of 'Dividend King' and indicating a stronger long-term value return commitment.
- Investment Recommendation Differences: Despite Altria's attractive high yield, it was not included in the analyst team's list of the top 10 stocks to buy, reflecting market concerns about its future growth potential, prompting investors to carefully assess the risk-reward profile.
See More
Altria Group: Dividend Growth and Investment Opportunities
- Dividend Yield Advantage: Altria Group currently boasts a 6.3% dividend yield, and over the past five years, shareholders have achieved nearly 18% annualized returns through reinvested dividends, significantly outperforming the S&P 500's 13%, indicating its continued appeal among dividend investors.
- Market Performance Comparison: Since February 2021, Altria's total return has reached 128.6%, far exceeding the S&P 500's 85.8% and outperforming Coca-Cola and Procter & Gamble, showcasing its strong performance in the consumer goods sector despite challenges in industry innovation.
- Dependence on Tobacco Products: While Altria generates around 88% of its revenue from smokeable products, its competitor Philip Morris International has successfully derived 41.5% of its revenue from smoke-free products, highlighting Altria's lag in adapting to market changes, which could impact future growth potential.
- Future Growth Potential: Altria is expected to continue offsetting declining cigarette volumes through price increases, and if it can successfully launch smokeless products, it could significantly enhance its valuation, with a current price-to-earnings ratio of only 12 times, indicating its attractiveness as a long-term investment.
See More
