Imperial Brands Plc – Value Analysis (LONDON:IMB) : December 21, 2017

Capitalcube gives Imperial Brands Plc a score of 54.

Our analysis is based on comparing Imperial Brands Plc with the following peers – British American Tobacco p.l.c., Karelia Tobacco Company Inc. and C&C Group Plc (BATS-GB, KARE-GR and CCR-GB).

Investment Outlook

Imperial Brands Plc has a fundamental score of 54 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance over the last year is in contrast with the more recent outperformance.
  • It currently trades at a Price/Book ratio of (4.80).
  • IMB-GB‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • IMB-GB‘s relative asset efficiency and net profit margins are both around the median level.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • IMB-GB‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s relatively high gross margin suggests some differentiation with pricing advantages versus peers.
  • While IMB-GB‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.

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Leverage & Liquidity

  • Of the 3 chosen peers for the company, only 2 of the stocks have an outstanding debt balance. Companies with no debt include KARE-GR.

IMB-GB has moved to a Quick & Able from a relatively high liquidity profile at the prior year-end.

  • IMB-GB‘s interest coverage is similar to its four-year average interest coverage of 4.98x.
  • Though its interest coverage has remained relatively stable at 4.86x compared to 2016, its peer median has decreased to 9.25x from 10.53x during this period.
  • Interest coverage rose 1.28 points relative to peers.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
British American Tobacco p.l.c. 16.74 0.87 7.93 24.81
Karelia Tobacco Company Inc. 0 4.58 No interest exp 999
C&C Group Plc 35.54 2.08 10.56 20.53
Imperial Brands PLC N/A 0.63 4.86 18.58
Peer Median 16.74 1.48 9.25 22.67
Best In Class 16.74 4.58 No interest exp 999

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Company Profile

Imperial Brands Plc engages in the manufacture and sell of cigarettes, tobaccos, cigars, rolling papers, and tubes. It operates through the Tobacco and Logistics segments. The Tobacco segment comprises of manufacture, marketing, and sale of tobacco and tobacco-related products, including sales to the Logistics business. The Logistics segment involves the distribution of tobacco products for tobacco product manufacturers, including Imperial Tobacco. The company was founded in 1901 and is headquartered in Bristol, United Kingdom.

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