Universal Corp (UVV): A Tiny Tobacco Company Earning Big Profits

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On the other hand, all of Universal’s peers, especially Philip Morris and Altria, are in a much worse financial position. On average, the four major tobacco companies have an average quick ratio of 0.9, and Altria’s debt is equal to more than three times shareholder equity. Unfortunately, due to large amounts of borrowing, Philip Morris has negative shareholder equity so a gearing ratio is impossible to calculate.

Cash is king and value prevails

Universal Corp (NYSE:UVV) has many benefits over its peers, but one of the more important factors is the company’s asset value per share, which currently stands at $44.80, with 35% of this, or $15.78 per share in cash. Currently, trading around $60.70 per share, Universal is trading at a P/B ration of 1.4 — below the majority of its peers and approaching value territory.

Foolish summary

All in all, Universal presents a compelling investment opportunity in a defensive sector, which for the most part, looks slightly expensive at present. Additionally, the company is still experiencing strong demand for its tobacco, has a strong balance sheet, and trades at a significant discount to its peers in the sector. Moreover, the company is also buying back stock and should continue to return cash and provide capital growth in the future.

The article A Tiny Tobacco Company Earning Big Profits originally appeared on Fool.com and is written by Rupert Hargreaves.

Fool contributor Rupert Hargreaves owns shares of Altria Group (NYSE:MO). The Motley Fool owns shares of Philip Morris International. Rupert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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