Head to Head Survey: Turning Point Brands (TPB) and Reynolds American (RAI)

Turning Point Brands (NYSE: TPB) and Reynolds American (NYSE:RAI) are both consumer staples companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, profitabiliy, earnings, dividends, valuation, analyst recommendations and institutional ownership.

Profitability

This table compares Turning Point Brands and Reynolds American’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Turning Point Brands 11.90% 131.39% 12.15%
Reynolds American 26.23% 15.64% 6.54%

Dividends

Reynolds American pays an annual dividend of $2.04 per share and has a dividend yield of 3.1%. Turning Point Brands 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. Turning Point Brands has increased its dividend for 7 consecutive years.

Earnings and Valuation

This table compares Turning Point Brands and Reynolds American’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Turning Point Brands $223.15 million 1.28 $45.38 million $1.36 11.14
Reynolds American $12.54 billion 7.46 $6.07 billion $2.31 28.38

Reynolds American has higher revenue and earnings than Turning Point Brands. Turning Point Brands is trading at a lower price-to-earnings ratio than Reynolds American, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Turning Point Brands has a beta of 0.58, meaning that its stock price is 42% less volatile than the S&P 500. Comparatively, Reynolds American has a beta of 0.41, meaning that its stock price is 59% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Turning Point Brands and Reynolds American, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Turning Point Brands 0 0 2 0 3.00
Reynolds American 0 8 1 0 2.11

Turning Point Brands presently has a consensus target price of $18.00, indicating a potential upside of 18.81%. Reynolds American has a consensus target price of $58.88, indicating a potential downside of 10.20%. Given Turning Point Brands’ stronger consensus rating and higher possible upside, equities research analysts clearly believe Turning Point Brands is more favorable than Reynolds American.

Institutional and Insider Ownership

68.7% of Turning Point Brands shares are held by institutional investors. Comparatively, 46.3% of Reynolds American shares are held by institutional investors. 0.1% of Reynolds American shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Turning Point Brands beats Reynolds American on 9 of the 17 factors compared between the two stocks.

About Turning Point Brands

Turning Point Brands, Inc. is an independent provider of Other Tobacco Products (OTP) in the United States. The Company operates in three segments smokeless products, smoking products and NewGen products. The smokeless products segment manufactures and markets moist snuff; and contracts for and markets chewing tobacco products. The smoking products segment imports and markets cigarette papers, tubes and related products; processes, packages and markets make-your-own (MYO) cigarette tobaccos; imports and markets finished cigars and MYO cigar tobaccos and cigar wraps, and processes, packages and markets pipe tobaccos. The NewGen products segment markets e-cigarettes, e-liquids, vaporizers and other related products, and distributes a wide assortment of vaping products to non-traditional retail outlets via VaporBeast. The Company’s portfolio of brands includes Zig-Zag, Beech-Nut, Stoker’s, Trophy, and VaporBeast.

About Reynolds American

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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