Reviewing Reynolds American (RAI) and Schweitzer-Mauduit International (SWM)

Reynolds American (NYSE: RAI) and Schweitzer-Mauduit International (NYSE:SWM) are both companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, earnings, valuation, analyst recommendations, dividends, risk and institutional ownership.

Profitability

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This table compares Reynolds American and Schweitzer-Mauduit International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Reynolds American 27.70% 16.91% 7.20%
Schweitzer-Mauduit International 3.50% 17.91% 6.42%

Institutional and Insider Ownership

46.3% of Reynolds American shares are held by institutional investors. Comparatively, 86.8% of Schweitzer-Mauduit International shares are held by institutional investors. 0.1% of Reynolds American shares are held by insiders. Comparatively, 1.8% of Schweitzer-Mauduit International shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Dividends

Reynolds American pays an annual dividend of $2.04 per share and has a dividend yield of 3.1%. Schweitzer-Mauduit International pays an annual dividend of $1.72 per share and has a dividend yield of 4.4%. Schweitzer-Mauduit International pays out 54.1% of its earnings in the form of a dividend. Reynolds American has increased its dividend for 8 consecutive years and Schweitzer-Mauduit International has increased its dividend for 6 consecutive years.

Volatility and Risk

Reynolds American has a beta of 0.4, indicating that its share price is 60% less volatile than the S&P 500. Comparatively, Schweitzer-Mauduit International has a beta of 1.31, indicating that its share price is 31% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Reynolds American and Schweitzer-Mauduit International, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Reynolds American 0 3 0 0 2.00
Schweitzer-Mauduit International 0 0 1 0 3.00

Reynolds American presently has a consensus target price of $64.00, indicating a potential downside of 2.14%. Schweitzer-Mauduit International has a consensus target price of $47.00, indicating a potential upside of 20.08%. Given Schweitzer-Mauduit International’s stronger consensus rating and higher possible upside, analysts clearly believe Schweitzer-Mauduit International is more favorable than Reynolds American.

Valuation & Earnings

This table compares Reynolds American and Schweitzer-Mauduit International’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Reynolds American N/A N/A N/A N/A N/A
Schweitzer-Mauduit International $982.00 million 1.23 $34.50 million $3.18 12.31

Schweitzer-Mauduit International has higher revenue and earnings than Reynolds American.

Summary

Schweitzer-Mauduit International beats Reynolds American on 9 of the 13 factors compared between the two stocks.

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.

Schweitzer-Mauduit International Company Profile

Schweitzer-Mauduit International, Inc., together with its subsidiaries, provides engineered solutions and advanced materials for various industries worldwide. The company operates through two segments, Engineered Papers and Advanced Materials & Structures. The Engineered Papers segment produces and sells cigarette papers, reconstituted tobacco leaf, and wrapper and binder products to cigarette and cigar manufacturers; and other non-tobacco paper products. It also offers low ignition propensity cigarette paper; and lightweight papers for printing and writing, flooring laminates, and food service packaging. The Advanced Materials & Structures segment manufactures resin-based nets, films, and other non-wovens for filtration, infrastructure and construction, transportation, medical, and industrial applications. Schweitzer-Mauduit International, Inc. was founded in 1995 and is headquartered in Alpharetta, Georgia.

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