What’s In Store For This Tobacco Master? – Reynolds American, Inc. (RAI)

The American tobacco and cigarette company, Philip Morris International Inc. (NYSE:PM), is trading at a forward P/E (1yr) of 14.22x and has a dividend yield of 3.80%. It has a strong PEG of 2.2 and a PEGY of 1.08. A mean recommendation of 2.2 on the sell side shows that it’s a far better buy than Reynolds American. A mean target price of $96.79 on the sell side shows that it has an upside potential of 6.5%. Hence, just like Lorillard, it’s one of the top buys in the tobacco industry at this point in time.

Conclusion

High cigarette taxes, smoking bans, and weak economy are the major reasons behind the sluggish cigarette industry. Further, more competition in the industry means that the profits would be shared in the future. As a result, most of the cigarette manufacturers are moving towards the smokeless market in the tobacco industry. Therefore, investing in products such as chewing tobacco and snuff has become the latest norm. However, Reynolds American is still far away from capturing substantial market share in the United States’ smokeless market. Moreover, with tough competition in the market, things won’t get much better in the near future. As a result, we remain neutral on Reynolds American.

The article What’s In Store For This Tobacco Master? originally appeared on Fool.com and is written by Waqar Saif.

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