British American Tobacco PLC (NYSE: BTI) and Reynolds American (NYSE:RAI) are both large-cap non-cyclical consumer goods & services companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, profitabiliy, earnings, dividends, valuation, risk and institutional ownership.

Insider and Institutional Ownership

46.3% of Reynolds American shares are owned by institutional investors. 0.1% of Reynolds American shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares British American Tobacco PLC and Reynolds American’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
British American Tobacco PLC 25.96% 55.18% 11.01%
Reynolds American 26.23% 15.64% 6.54%

Valuation and Earnings

This table compares British American Tobacco PLC and Reynolds American’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
British American Tobacco PLC $19.34 billion 6.65 $7.60 billion N/A N/A
Reynolds American $12.54 billion 7.44 $6.07 billion $2.31 28.31

British American Tobacco PLC has higher revenue and earnings than Reynolds American.

Dividends

Reynolds American pays an annual dividend of $2.04 per share and has a dividend yield of 3.1%. British American Tobacco PLC does not pay a dividend. Reynolds American pays out 88.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. British American Tobacco PLC has increased its dividend for 7 consecutive years.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for British American Tobacco PLC and Reynolds American, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
British American Tobacco PLC 0 0 3 0 3.00
Reynolds American 0 8 1 0 2.11

British American Tobacco PLC presently has a consensus target price of $69.00, suggesting a potential downside of 0.30%. Reynolds American has a consensus target price of $58.88, suggesting a potential downside of 9.98%. Given British American Tobacco PLC’s stronger consensus rating and higher probable upside, research analysts clearly believe British American Tobacco PLC is more favorable than Reynolds American.

Summary

British American Tobacco PLC beats Reynolds American on 9 of the 15 factors compared between the two stocks.

British American Tobacco PLC Company Profile

British American Tobacco p.l.c. is a tobacco and next generation products company. The Company’s tobacco product range includes cigarettes, fine cut (roll-your-own and make-your-own tobacco) and Swedish-style snus. Its segments include Asia-Pacific, Americas, Western Europe, and Eastern Europe, Middle East and Africa (EEMEA). The Asia-Pacific segment includes its operations in various countries, including Australia, Pakistan, Malaysia, Vietnam, Japan, South Korea, Indonesia, New Zealand and Bangladesh. The Americas segment includes its operations in various countries, including Brazil, Mexico, Canada, Colombia, Argentina, Chile and Venezuela. The Western Europe segment includes its operations in various countries, including Germany, Denmark, Switzerland, Belgium, France, the United Kingdom, Romania, Spain, Italy, Poland and Croatia/Balkans. The EEMEA segment includes its operations in various countries, including Russia, Ukraine, South Africa, Turkey, Egypt, Nigeria and Algeria.

Reynolds American Company Profile

Reynolds American Inc. (RAI) is a holding company. The Company’s segments include RJR Tobacco, which consists of the primary operations of its subsidiary, R. J. Reynolds Tobacco Company; Santa Fe, which consists of the primary operations of its subsidiary, Santa Fe Natural Tobacco Company, Inc., and American Snuff, which consists of the primary operations of its subsidiary, American Snuff Company, LLC. The RJR Tobacco segment manages contract manufacturing of cigarettes and tobacco products through arrangements with British American Tobacco p.l.c. affiliates, and manages the export of tobacco products to certain United States territories, the United States duty-free shops and the United States overseas military bases. The American Snuff segment offers adult tobacco consumers a range of segregated smokeless tobacco products, primarily moist snuff. The Santa Fe segment manufactures and markets super-premium cigarettes and other tobacco products under the NATURAL AMERICAN SPIRIT brand.

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