Altria

Methodology

Altria's cigarette volume declines create negative earnings growth despite pricing power, making traditional Peter Lynch calculations challenging or misleading. The company manages a declining franchise through price increases that partially offset volume losses. Focus on free cash flow sustainability and dividend coverage rather than EPS growth for this mature tobacco company.

Methodology

PEG analysis is problematic for Altria given negative or minimal earnings growth from cigarette volume declines, which can create mathematically meaningless or extremely high ratios. The business model emphasizes cash generation and dividend payments rather than growth. Evaluate using dividend yield, free cash flow yield, and price-to-book value instead of growth-based metrics.

Methodology

Altria offers a very substantial dividend yield that dominates total return expectations, making PEGY more relevant than standalone PEG despite growth challenges. The high yield compensates for volume declines as management extracts maximum cash from the cigarette franchise. For tobacco investors, dividend sustainability and modest increases matter far more than earnings growth in driving returns.