4-Star Stocks Poised to Pop: Reynolds

Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, cigarette maker Reynolds American (NYSE: RAI  ) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Reynolds' business and see what CAPS investors are saying about the stock right now.

Reynolds facts

Headquarters (Founded) Winston-Salem, N.C. (1875)
Market Cap $23.04 billion
Industry Tobacco
Trailing-12-Month Revenue $8.56 billion
Management

President/CEO Daniel Delen (since March 2011)

Vice President/CFO Thomas Adams (since January 2008)

Return on Equity (Average, Past 3 Years) 18%
Cash/Debt $3 billion / $4.1 billion
Dividend Yield 5.4%
Competitors

Altria (NYSE: MO  )

Philip Morris International (NYSE: PM  )

Vector Group (NYSE: VGR  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 93% of the 581 members who have rated Reynolds believe the stock will outperform the S&P 500 going forward. These bulls include trooper999 and All-Star Staka, who is ranked in the top 2% of our community.

Just last month, trooper999 tapped Reynolds as a solid income opportunity: "Dividend play. A Good [return on invested capital] gives them a good chance to maintain this dividend as earnings slow. They are a little expensive but the next few years will be about dividends."

Currently, Reynolds even sports a cheapish EV/EBITDA ratio 8.6. That represents a discount to other cigarette stocks like Altria (9.7), Philip Morris (11.3), and Vector Group (11.6).

CAPS All-Star Staka offers a balanced look at Reynolds:

Positive:
- Blue chip with a solid dividend
- Defensive (just in case everybody is wrong with their positive economic outlooks)
- Popular brands, lots of moat

Negative:
- The usual litigation thing
- Danger of more restrictive political actions

What do you think about Reynolds, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended Philip Morris International. The Motley Fool owns shares of Altria and Philip Morris. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.


Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 20, 2011, at 12:13 PM, mm5525 wrote:

    RAI is a good company with a lot of great brands like Pall Mall, Camel, and Grizzly, but I like PM a lot better because there is zero U.S. litigation exposure or exposure to the US Dollar. The Marlboro Man has more market share and more growth potential despite a lower yield than RAI.

Add your comment.

DocumentId: 1497420, ~/Articles/ArticleHandler.aspx, 8/2/2014 4:45:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement