Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified

Reynolds American

(

RAI

) as a pre-market laggard candidate. In addition to specific proprietary factors, Trade-Ideas identified Reynolds American as such a stock due to the following factors:

  • RAI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $225.8 million.
  • RAI traded 18,436 shares today in the pre-market hours as of 8:03 AM.
  • RAI is down 2% today from Friday's close.

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More details on RAI:

Reynolds American Inc., through its subsidiaries, manufactures and sells cigarettes and other tobacco products in the United States. It operates through RJR Tobacco, American Snuff, and Santa Fe segments. The stock currently has a dividend yield of 3.9%. RAI has a PE ratio of 25.5. Currently there are 4 analysts that rate Reynolds American a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Reynolds American has been 2.4 million shares per day over the past 30 days. Reynolds American has a market cap of $36.6 billion and is part of the consumer goods sector and tobacco industry. The stock has a beta of 0.69 and a short float of 5.6% with 5.22 days to cover. Shares are up 9.8% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Reynolds American as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 23.1%. Since the same quarter one year prior, revenues slightly increased by 4.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, RAI's share price has jumped by 28.76%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • REYNOLDS AMERICAN INC's earnings per share declined by 48.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, REYNOLDS AMERICAN INC reported lower earnings of $2.71 versus $3.14 in the prior year. This year, the market expects an improvement in earnings ($3.79 versus $2.71).
  • 47.99% is the gross profit margin for REYNOLDS AMERICAN INC which we consider to be strong. Regardless of RAI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RAI's net profit margin of 6.93% is significantly lower than the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Tobacco industry and the overall market, REYNOLDS AMERICAN INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.

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