Altria currently trades at $66.56 per share and has shown little upside over the past six months, posting a middling return of 1.3%.
Does this present a buying opportunity for MO? Or is its underperformance reflective of its story and business quality? Find out in our full research report, it’s free.
Why Does Altria Spark Debate?
Best known for its Marlboro brand of cigarettes, Altria (NYSE: MO) offers tobacco and nicotine products.
Two Positive Attributes:
1. Elite Gross Margin Powers Best-In-Class Business Model
All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products, has a stronger brand, and commands pricing power.
Altria has best-in-class unit economics for a consumer staples company, enabling it to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an elite 87.1% gross margin over the last two years. That means for every $100 in revenue, only $12.89 went towards paying for raw materials, production of goods, transportation, and distribution. 
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Altria has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging an eye-popping 43.6% over the last two years.
One Reason to be Careful:
Long-Term Revenue Growth Flatter Than a Pancake
A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Altria struggled to consistently increase demand as its $20.14 billion of sales for the trailing 12 months was close to its revenue three years ago. This wasn’t a great result, but there are still things to like about Altria.
Final Judgment
Altria’s positive characteristics outweigh the negatives, but at $66.56 per share (or 11.8× forward P/E), is now the right time to buy the stock? See for yourself in our in-depth research report, it’s free.
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