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Reynolds American Inc
RAI : NYSE : Consumer Goods
$49.31 up0.35 | 0.71%
Today's Range: 48.86 - 49.46
Avg. Daily Volume: 5,127,800
04/28/16 - 4:00 PM ET

Financial Analysis


REYNOLDS AMERICAN INC's gross profit margin for the first quarter of its fiscal year 2016 is essentially unchanged when compared to the same period a year ago. The company has grown sales and net income significantly, outpacing the average growth rates of competitors within its industry. REYNOLDS AMERICAN INC has weak liquidity. Currently, the Quick Ratio is 0.60 which shows a lack of ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow.

At the same time, stockholders' equity ("net worth") has greatly increased by 368.31% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future.

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Income Statement Q1 FY16 Q1 FY15
Net Sales ($mil)2917.02057.0
EBITDA ($mil)1311.0736.0
EBIT ($mil)1281.0708.0
Net Income ($mil)3565.0389.0


Balance Sheet Q1 FY16 Q1 FY15
Cash & Equiv. ($mil)4455.01615.0
Total Assets ($mil)54408.015850.0
Total Debt ($mil)13716.05079.0
Equity ($mil)21163.04519.0


Profitability Q1 FY16 Q1 FY15
Gross Profit Margin60.8859.89
EBITDA Margin44.9435.78
Operating Margin43.9134.42
Sales Turnover0.210.54
Return on Assets11.819.43
Return on Equity30.3733.1
Debt Q1 FY16 Q1 FY15
Current Ratio0.990.94
Debt/Capital0.390.53
Interest Expense174.091.0
Interest Coverage7.367.78


Share Data Q1 FY16 Q1 FY15
Shares outstanding (mil)1427.341064.03
Div / share0.420.34
EPS2.490.37
Book value / share14.834.25
Institutional Own % n/a n/a
Avg Daily Volume5126693.05330919.0

Valuation


BUY. This stock's P/E ratio indicates a discount compared to an average of 19.41 for the Tobacco industry and a significant discount compared to the S&P 500 average of 24.18. Conducting a second comparison, its price-to-book ratio of 3.26 indicates a premium versus the S&P 500 average of 2.76 and a significant discount versus the industry average of 21.06. The current price-to-sales ratio is well above the S&P 500 average and above the industry average, indicating a premium. Upon assessment of these and other key valuation criteria, REYNOLDS AMERICAN INC proves to trade at a discount to investment alternatives within the industry.


Price/Earnings
1 2 3 4 5
premium   discount
  Price/Cash Flow
1 2 3 4 5
premium   discount
RAI 10.00 Peers 19.41   RAI NM Peers 17.60

Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations.

RAI is trading at a significant discount to its peers.

 

Neutral. The P/CF ratio, a stock’s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures.

RAI's P/CF is negative making the measure meaningless.

 
Price/Projected
Earnings
1 2 3 4 5
premium   discount
  Price to
Earnings/Growth
1 2 3 4 5
premium   discount
RAI 18.37 Peers 12.85   RAI NM Peers 6.53

Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations.

RAI is trading at a significant premium to its peers.

 

Neutral. The PEG ratio is the stock’s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples.

RAI's negative PEG ratio makes this valuation measure meaningless.

 
Price/Book
1 2 3 4 5
premium   discount
  Earnings Growth
1 2 3 4 5
lower   higher
RAI 3.26 Peers 21.06   RAI 243.77 Peers 40.34

Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet.

RAI is trading at a significant discount to its peers.

 

Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios.

RAI is expected to have an earnings growth rate that significantly exceeds its peers.

 
Price/Sales
1 2 3 4 5
premium   discount
  Sales Growth
1 2 3 4 5
premium   discount
RAI 5.98 Peers 5.87   RAI 34.23 Peers -1.72

Average. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales.

RAI is trading at a valuation on par with its industry on this measurement.

 

Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share.

RAI has a sales growth rate that significantly exceeds its peers.

 

 

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