Reynolds American (RAI) Is Today's Unusual Social Activity Stock - TheStreet

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 or Stephanie Link.

Trade-Ideas LLC identified

Reynolds American

(

RAI

) as an unusual social activity candidate. In addition to specific proprietary factors, Trade-Ideas identified Reynolds American as such a stock due to the following factors:

  • RAI has 10x the normal benchmarked social activity for this time of the day compared to its average of 7.39 mentions/day.
  • RAI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $236.0 million.

Identifying stocks with 'Unusual Social Activity' tends to be a valuable process for traders looking to capitalize on the 'talk of the town' stocks that are basking in far more attention from the StockTwits financial community than normal. Good press? Bad press? It ultimately doesn't matter if it's good or bad if you know how to trade around the sentiment. Certain hedge funds use such data for their proprietary algorithms and it is not uncommon to see shared social sentiment play itself out in a stock's price trend.

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More details on RAI:

Reynolds American Inc., together with its subsidiaries, manufactures and sells cigarette and other tobacco products in the United States. The company operates through RJR Tobacco, American Snuff, and Santa Fe segments. The stock currently has a dividend yield of 4.7%. RAI has a PE ratio of 19.9. Currently there are 3 analysts that rate Reynolds American a buy, 2 analysts rate it a sell, and 3 rate it a hold.

The average volume for Reynolds American has been 2.5 million shares per day over the past 30 days. Reynolds American has a market cap of $30.5 billion and is part of the consumer goods sector and tobacco industry. The stock has a beta of 0.23 and a short float of 1.4% with 1.49 days to cover. Shares are up 13.4% year-to-date as of the close of trading on Monday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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, notable return on equity, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.3%. Since the same quarter one year prior, revenues slightly increased by 2.8%. 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.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Tobacco industry and the overall market, REYNOLDS AMERICAN INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • REYNOLDS AMERICAN INC's earnings per share declined by 31.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, REYNOLDS AMERICAN INC increased its bottom line by earning $3.14 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($3.36 versus $3.14).
  • The gross profit margin for REYNOLDS AMERICAN INC is rather high; currently it is at 53.13%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 18.75% trails the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's 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 the other strengths this company displays justify these higher price levels.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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