By Dan Ferris in Extreme Value:

A three-judge panel for a federal appeals court unanimously concluded the tobacco industry "intentionally deceived the public about the harmful and addictive effects of cigarette smoking," according to the Wall Street Journal.

Altria vice president Murray Garnick said the court's decision was not "supported by the law or the evidence presented at trial, and we believe the exceptional importance of these issues justifies further review." Altria said it will appeal the ruling.

Altria generated $3.08 billion in free cash flow over the last four quarters, a figure that will likely rise due to its acquisition of UST, the dominant smokeless tobacco company in the world. Unlike cigarettes, smokeless tobacco is a growing market in the United States.

Also, don't forget, Marlboro is bigger than the next 10 cigarette brands combined. In a hostile, litigious environment, Altria has much greater resources to fight legal battles. It's been subject to enormous penalties, most of them based on wrong-headed notions about Altria's obligation to do anything but sell as many cigarettes as possible. And still it cranks out huge amounts of cash flow.

Altria sells today for about 11 times free cash flow, dirt-cheap for the Intel of the U.S. cigarette industry. I think it's worth at least double this price tag.

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