Course 407: High-Yield Stocks
Is This Stock Expensive Relative to Others in Its Industry?
In this course
1 Introduction
2 What Is the Company's Dividend Track Record?
3 Is the Payout Ratio Rising?
4 Are the Company's Sales and Earnings in Line and Stable?
5 Does the Company Generate Consistent Free Cash Flow?
6 Is the Balance Sheet Healthy?
7 How Has the Stock Performed?
8 Is This Stock Expensive Relative to Others in Its Industry?
9 Conclusion: Looking Both Ways

Philip Morris is cheap by just about any measure, especially compared to other large-cap stocks. Its P/E (price/earnings) of 9 at the end of 1999 was less than a quarter the S&P 500's, and its price/sales and price/cash-flow ratios were similarly low. The main reason for this, of course, is the tobacco business, and the market's jitters about possible liability payouts eating into future earnings. Few companies are better prepared for such an eventuality, though. The $6 billion in cash Philip Morris generates each year is enough to pay for hundreds of lawsuits.

Next: Conclusion: Looking Both Ways >>


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