Reynolds American Inc

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RAI : NYSE : Consumer Goods
$65.93 up 0.48 | 0.73%
Today's Range: 65.72 - 65.97
Avg. Daily Volume: 4686900.0
06/23/17 - 11:20 AM ET

Financial Analysis


REYNOLDS AMERICAN INC's gross profit margin for the first quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. Even though sales increased, the net income has decreased. REYNOLDS AMERICAN INC has weak liquidity. Currently, the Quick Ratio is 0.55 which shows a lack of ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year.

At the same time, stockholders' equity ("net worth") has remained virtually unchanged only increasing by 2.56% 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 FY17 Q1 FY16
Net Sales ($mil)2949.02917.0
EBITDA ($mil)1358.01311.0
EBIT ($mil)1326.01281.0
Net Income ($mil)780.03565.0


Balance Sheet Q1 FY17 Q1 FY16
Cash & Equiv. ($mil)3154.04455.0
Total Assets ($mil)51959.054408.0
Total Debt ($mil)13152.013716.0
Equity ($mil)21706.021163.0


Profitability Q1 FY17 Q1 FY16
Gross Profit Margin60.2260.88
EBITDA Margin46.0444.94
Operating Margin44.9643.91
Sales Turnover0.240.21
Return on Assets6.3211.81
Return on Equity15.1430.37
Debt Q1 FY17 Q1 FY16
Current Ratio0.870.99
Debt/Capital0.380.39
Interest Expense149.0174.0
Interest Coverage8.97.36


Share Data Q1 FY17 Q1 FY16
Shares outstanding (mil)1426.841427.34
Div / share0.510.42
EPS0.552.49
Book value / share15.2114.83
Institutional Own % n/a n/a
Avg Daily Volume4918761.07834639.0

Valuation


BUY. REYNOLDS AMERICAN INC's P/E ratio indicates a premium compared to an average of 22.29 for the Tobacco industry and a premium compared to the S&P 500 average of 25.73. Conducting a second comparison, its price-to-book ratio of 4.32 indicates a premium versus the S&P 500 average of 3.08 and a significant discount versus the industry average of 11.07. The current price-to-sales ratio is well above the S&P 500 average and above the industry average, indicating a premium. The valuation analysis reveals that, REYNOLDS AMERICAN INC seems to be trading at a premium 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 28.44 Peers 22.29   RAI 46.65 Peers 29.38

Premium. A higher P/E ratio than its peers can signify a more expensive stock or higher growth expectations.

RAI is trading at a significant premium to its peers.

 

Premium. 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 is trading at a significant premium to its peers.

 
Price/Projected
Earnings
1 2 3 4 5
premium   discount
  Price to
Earnings/Growth
1 2 3 4 5
premium   discount
RAI 24.06 Peers 15.39   RAI NM Peers 1.28

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 4.32 Peers 11.07   RAI -52.18 Peers 26.34

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.

 

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

However, RAI is expected to significantly trail its peers on the basis of its earnings growth rate.

 
Price/Sales
1 2 3 4 5
premium   discount
  Sales Growth
1 2 3 4 5
premium   discount
RAI 7.48 Peers 7.25   RAI 8.66 Peers -0.23

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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