Common Stock Valuation Ratios (Price Multiples)
Valuation ratios measure the quantity of an asset or flaw (e.g., earnings) associated with ownership of a specified claim (e.g., a share of ownership of the enterprise).
Current Valuation Ratios
Reynolds American Inc., current price multiples
| Reynolds American Inc. | Coca-Cola Co. | Mondelēz International Inc. | PepsiCo Inc. | Philip Morris International Inc. | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Current share price (P) | $64.47 | |||||
| No. shares of common stock outstanding | 1,426,711,959 | |||||
| Growth rate (g) | 8.12% | |||||
| Earnings per share (EPS) | $4.26 | |||||
| Next year expected EPS | $4.60 | |||||
| Operating profit per share | $7.41 | |||||
| Sales per share | $11.81 | |||||
| Book value per share (BVPS) | $15.22 | |||||
| Valuation Ratios (Price Multiples) | ||||||
| Price to earnings (P/E) | 15.15 | 31.44 | 34.80 | 23.55 | 29.02 | |
| Price to next year expected earnings | 14.01 | 28.45 | 33.08 | 21.01 | — | |
| Price-earnings-growth (PEG) | 1.86 | 2.99 | 6.70 | 1.95 | — | |
| Price to operating profit (P/OP) | 8.70 | 29.95 | 24.04 | 16.88 | 22.11 | |
| Price to sales (P/S) | 5.46 | 8.60 | 2.21 | 2.07 | 8.10 | |
| Price to book value (P/BV) | 4.24 | 12.81 | 3.30 | 9.51 | — | |
Based on: 10-K (reporting date: 2016-12-31).
If the company price multiple is lower then the price multiple of benchmark then company stock is relatively undervalued.
Otherwise, if the company price multiple is higher then the price multiple of benchmark then company stock is relatively overvalued.
Historical Valuation Ratios (Summary)
Reynolds American Inc., historical price multiples
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
The valuation multiples for the period between 2012 and 2016 exhibit contrasting trajectories between profitability-based metrics and revenue-based metrics. While earnings-related ratios showed significant volatility and an eventual decline, the valuation relative to sales increased steadily throughout the five-year span.
- Price to Earnings (P/E) and Price to Operating Profit (P/OP)
- Both ratios followed a similar pattern of fluctuation, characterized by a notable peak in 2014. The P/E ratio rose from 19.10 in 2012 to a high of 25.41 in 2014, before descending to 14.21 by 2016. Similarly, the P/OP ratio reached its apex at 14.76 in 2014, ending the period at 8.17. This indicates a contraction in the premium investors were willing to pay for earnings and operating profits toward the end of the period.
- Price to Sales (P/S)
- In contrast to the earnings multiples, the Price to Sales ratio demonstrated a consistent and uninterrupted upward trend. Starting at 1.99 in 2012, the ratio grew annually to reach 5.12 by 2016. This trend suggests an increasing market valuation relative to the company's top-line revenue generation over the analyzed timeframe.
- Price to Book Value (P/BV)
- The P/BV ratio experienced significant volatility, peaking in 2014 at 8.26. This peak was followed by a sharp correction in 2015, where the ratio fell to 3.79, before stabilizing at 3.98 in 2016. The substantial decline after 2014 indicates a significant shift in the relationship between the market price and the company's net asset value.
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Price to Earnings (P/E)
Reynolds American Inc., historical P/E calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 1,425,934,305 | 1,427,341,341 | 1,062,567,026 | 1,073,894,304 | 1,105,896,384 | |
| Selected Financial Data (US$) | ||||||
| Net income (in millions) | 6,073) | 3,253) | 1,470) | 1,718) | 1,272) | |
| Earnings per share (EPS)2 | 4.26 | 2.28 | 1.38 | 1.60 | 1.15 | |
| Share price1, 3 | 60.54 | 48.50 | 35.15 | 24.04 | 21.97 | |
| Valuation Ratio | ||||||
| P/E ratio4 | 14.21 | 21.28 | 25.41 | 15.03 | 19.10 | |
| Benchmarks | ||||||
| P/E Ratio, Competitors5 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 Data adjusted for splits and stock dividends.
2 2016 Calculation
EPS = Net income ÷ No. shares of common stock outstanding
= 6,073,000,000 ÷ 1,425,934,305 = 4.26
3 Closing price as at the filing date of Reynolds American Inc. Annual Report.
4 2016 Calculation
P/E ratio = Share price ÷ EPS
= 60.54 ÷ 4.26 = 14.21
5 Click competitor name to see calculations.
The valuation metrics from 2012 to 2016 exhibit a period of consistent capital appreciation accompanied by fluctuating earnings multiples. While the share price maintained a steady upward trajectory, the Price-to-Earnings (P/E) ratio experienced notable volatility, reflecting the diverging growth rates between market price and actual earnings per share.
- Share Price Performance
- A sustained increase in share price is observed, rising from 21.97 US$ in 2012 to 60.54 US$ by the end of 2016. This represents a continuous and accelerating growth pattern throughout the five-year period.
- Earnings per Share (EPS) Trends
- Earnings per share demonstrated an overall positive trajectory, increasing from 1.15 US$ in 2012 to 4.26 US$ in 2016. A temporary contraction is noted in 2014, where EPS decreased to 1.38 US$ from the previous year's 1.60 US$, before experiencing rapid growth in 2015 and 2016.
- Price-to-Earnings (P/E) Ratio Dynamics
- The P/E ratio exhibited significant volatility, peaking at 25.41 in 2014. This peak coincided with the dip in EPS while the share price continued to rise, indicating a temporary expansion in the valuation multiple. By 2016, the ratio declined to its lowest level of 14.21, as the substantial increase in earnings outpaced the growth of the share price, resulting in a more compressed valuation multiple.
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Price to Operating Profit (P/OP)
Reynolds American Inc., historical P/OP calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 1,425,934,305 | 1,427,341,341 | 1,062,567,026 | 1,073,894,304 | 1,105,896,384 | |
| Selected Financial Data (US$) | ||||||
| Operating income (in millions) | 10,569) | 6,953) | 2,531) | 3,132) | 2,214) | |
| Operating profit per share2 | 7.41 | 4.87 | 2.38 | 2.92 | 2.00 | |
| Share price1, 3 | 60.54 | 48.50 | 35.15 | 24.04 | 21.97 | |
| Valuation Ratio | ||||||
| P/OP ratio4 | 8.17 | 9.96 | 14.76 | 8.24 | 10.97 | |
| Benchmarks | ||||||
| P/OP Ratio, Competitors5 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 Data adjusted for splits and stock dividends.
2 2016 Calculation
Operating profit per share = Operating income ÷ No. shares of common stock outstanding
= 10,569,000,000 ÷ 1,425,934,305 = 7.41
3 Closing price as at the filing date of Reynolds American Inc. Annual Report.
4 2016 Calculation
P/OP ratio = Share price ÷ Operating profit per share
= 60.54 ÷ 7.41 = 8.17
5 Click competitor name to see calculations.
Between 2012 and 2016, the company experienced a consistent and significant increase in share price, rising from $21.97 to $60.54. Operating profit per share generally followed an upward trajectory, increasing from $2.00 in 2012 to $7.41 by 2016, despite a temporary decline observed in 2014.
- Price to Operating Profit (P/OP) Volatility
- The P/OP ratio exhibited notable fluctuations throughout the period, with values ranging from a low of 8.17 to a peak of 14.76. The most significant spike occurred in 2014, where the ratio reached 14.76. This increase was a result of the share price rising to $35.15 while the operating profit per share simultaneously contracted to $2.38.
- Valuation Compression
- Following the 2014 peak, a downward trend in the P/OP ratio is observed. The multiple compressed to 9.96 in 2015 and further to 8.17 in 2016. This suggests that the growth in operating profitability accelerated more rapidly than the share price during the latter two years of the analysis.
- Operating Efficiency and Market Valuation
- A divergence is evident between the linear growth of the share price and the non-linear growth of operating profits. By December 31, 2016, the company achieved its lowest P/OP ratio of the five-year period (8.17) at the same time it reached its highest operating profit per share ($7.41), indicating a valuation that became more attractive relative to the underlying operating performance.
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Price to Sales (P/S)
Reynolds American Inc., historical P/S calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 1,425,934,305 | 1,427,341,341 | 1,062,567,026 | 1,073,894,304 | 1,105,896,384 | |
| Selected Financial Data (US$) | ||||||
| Net sales, includes excise taxes (in millions) | 16,846) | 14,884) | 12,096) | 11,966) | 12,227) | |
| Sales per share2 | 11.81 | 10.43 | 11.38 | 11.14 | 11.06 | |
| Share price1, 3 | 60.54 | 48.50 | 35.15 | 24.04 | 21.97 | |
| Valuation Ratio | ||||||
| P/S ratio4 | 5.12 | 4.65 | 3.09 | 2.16 | 1.99 | |
| Benchmarks | ||||||
| P/S Ratio, Competitors5 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 Data adjusted for splits and stock dividends.
2 2016 Calculation
Sales per share = Net sales, includes excise taxes ÷ No. shares of common stock outstanding
= 16,846,000,000 ÷ 1,425,934,305 = 11.81
3 Closing price as at the filing date of Reynolds American Inc. Annual Report.
4 2016 Calculation
P/S ratio = Share price ÷ Sales per share
= 60.54 ÷ 11.81 = 5.12
5 Click competitor name to see calculations.
Between 2012 and 2016, a significant expansion in the valuation multiple is observed. The Price-to-Sales (P/S) ratio experienced a consistent and substantial increase, rising from 1.99 in 2012 to 5.12 by the end of 2016.
- Share Price Trajectory
- A strong and continuous upward trend is evident in the share price, which grew from 21.97 US$ in 2012 to 60.54 US$ in 2016. This represents a significant increase in market capitalization per share over the five-year period.
- Sales per Share Performance
- In contrast to the share price, sales per share remained relatively stable with minimal growth. The value moved from 11.06 US$ in 2012 to 11.81 US$ in 2016, characterized by a slight decline in 2015 to 10.43 US$ before recovering in 2016.
- P/S Ratio Analysis
- The P/S ratio more than doubled over the analyzed period, accelerating specifically between 2014 and 2016. Because the growth in the P/S ratio far outpaced the growth in sales per share, the trend indicates that the valuation increase was driven by market appreciation and expanding multiples rather than by an increase in top-line revenue generation per share.
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Price to Book Value (P/BV)
Reynolds American Inc., historical P/BV calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 1,425,934,305 | 1,427,341,341 | 1,062,567,026 | 1,073,894,304 | 1,105,896,384 | |
| Selected Financial Data (US$) | ||||||
| Shareholders’ equity (in millions) | 21,711) | 18,252) | 4,522) | 5,167) | 5,257) | |
| Book value per share (BVPS)2 | 15.23 | 12.79 | 4.26 | 4.81 | 4.75 | |
| Share price1, 3 | 60.54 | 48.50 | 35.15 | 24.04 | 21.97 | |
| Valuation Ratio | ||||||
| P/BV ratio4 | 3.98 | 3.79 | 8.26 | 5.00 | 4.62 | |
| Benchmarks | ||||||
| P/BV Ratio, Competitors5 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 Data adjusted for splits and stock dividends.
2 2016 Calculation
BVPS = Shareholders’ equity ÷ No. shares of common stock outstanding
= 21,711,000,000 ÷ 1,425,934,305 = 15.23
3 Closing price as at the filing date of Reynolds American Inc. Annual Report.
4 2016 Calculation
P/BV ratio = Share price ÷ BVPS
= 60.54 ÷ 15.23 = 3.98
5 Click competitor name to see calculations.
Between 2012 and 2016, the valuation of the common stock exhibited significant volatility in the Price to Book Value (P/BV) ratio, driven by divergent movements in the market share price and the book value per share (BVPS).
- Share Price Trajectory
- A consistent and aggressive upward trend is observed in the share price, which rose from US$ 21.97 in 2012 to US$ 60.54 in 2016. This steady appreciation reflects a sustained increase in market valuation over the five-year period.
- Book Value per Share (BVPS) Dynamics
- The BVPS remained relatively stagnant during the first three years, experiencing a slight decline from US$ 4.75 in 2012 to a low of US$ 4.26 in 2014. A significant shift occurred in 2015, where the BVPS increased sharply to US$ 12.79, continuing its ascent to US$ 15.23 by the end of 2016.
- P/BV Ratio Interpretation
- The P/BV ratio peaked at 8.26 in 2014, a result of the share price increasing while the book value per share simultaneously declined. This peak represents the period of highest premium relative to book value. In 2015, the ratio contracted sharply to 3.79, as the substantial growth in BVPS offset the rise in share price. The ratio remained stable in 2016 at 3.98, suggesting a normalization of the valuation multiple following the expansion of the company's book value.
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