Reynolds American Inc

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RAI : NYSE : Consumer Goods
$49.57 up 0.04 | 0.08%
Today's Range: 49.33 - 49.61
Avg. Daily Volume: 4,296,100
08/31/16 - 4:03 PM ET

Financial Analysis


REYNOLDS AMERICAN INC's gross profit margin for the second quarter of its fiscal year 2016 has increased when compared to the same period a year ago. Even though sales increased, the net income has decreased. REYNOLDS AMERICAN INC has very weak liquidity. Currently, the Quick Ratio is 0.44 which clearly shows a lack of ability to cover short-term cash needs. The liquidity decreased from the same period a year ago, despite already having weak liquidity to begin with. This would indicate deteriorating cash flow.

During the same period, stockholders' equity ("net worth") has increased by 16.77% from the same quarter last year. The key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the near future.

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Income Statement Q2 FY16 Q2 FY15
Net Sales ($mil)3195.02403.0
EBITDA ($mil)1494.0932.0
EBIT ($mil)1463.0904.0
Net Income ($mil)796.01928.0


Balance Sheet Q2 FY16 Q2 FY15
Cash & Equiv. ($mil)1944.04360.0
Total Assets ($mil)51772.054558.0
Total Debt ($mil)13693.018000.0
Equity ($mil)21400.018326.0


Profitability Q2 FY16 Q2 FY15
Gross Profit Margin60.8855.93
EBITDA Margin46.7638.78
Operating Margin45.7937.62
Sales Turnover0.240.16
Return on Assets10.235.37
Return on Equity24.7515.99
Debt Q2 FY16 Q2 FY15
Current Ratio1.031.16
Debt/Capital0.390.5
Interest Expense152.0105.0
Interest Coverage9.638.61


Share Data Q2 FY16 Q2 FY15
Shares outstanding (mil)1427.341429.1
Div / share0.420.34
EPS0.561.69
Book value / share14.9912.82
Institutional Own % n/a n/a
Avg Daily Volume4277741.04405312.0

Valuation


BUY. This stock's P/E ratio indicates a discount compared to an average of 21.25 for the Tobacco industry and a significant discount compared to the S&P 500 average of 25.13. Conducting a second comparison, its price-to-book ratio of 3.35 indicates a premium versus the S&P 500 average of 2.82 and a significant discount versus the industry average of 20.48. The current price-to-sales ratio is well above the S&P 500 average, but below the industry average. 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 13.58 Peers 21.25   RAI NM Peers 20.51

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 19.37 Peers 13.40   RAI NM Peers 4.86

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 3.35 Peers 20.48   RAI 40.41 Peers 2.00

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 5.82 Peers 6.27   RAI 39.54 Peers -0.69

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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