Reynolds American Inc. (NYSE:RAI)

The financial data reveals several noteworthy trends in share price, operating profit per share, and the price-to-operating-profit ratio over an approximately twelve-year period.

Share Price

The share price exhibited an overall upward trajectory despite some fluctuations. Initially, it increased from 13.25 USD in early 2006 to a peak of 16.22 USD in early 2008. A significant decline followed in early 2009, dropping to 8.83 USD, likely reflecting adverse market or company-specific conditions. Subsequently, the share price demonstrated consistent recovery and growth, rising steadily from 13.17 USD in early 2010 to 60.54 USD by early 2017. This represents an approximate 4.6-fold increase over the examined period post-recovery, signaling strong investor confidence and potentially positive business performance.

Operating Profit per Share (OPPS)

The operating profit per share showed a generally positive trend with some variability. From 1.24 USD in early 2006, the figure increased to 1.94 USD in early 2008. There was a minor drop in early 2009 to 1.76 USD, paralleling the share price decline. After a slight dip in early 2010 to 1.52 USD, the OPPS recovered and remained relatively stable around 2 USD to 2.92 USD through 2014. From 2015 onward, a significant improvement is observed, with OPPS reaching 4.87 USD in 2016 and further growing to 7.41 USD in 2017. This indicates improving operational efficiency and profitability over the long term.

Price to Operating Profit Ratio (P/OP)

The P/OP ratio experienced considerable fluctuations across the time frame. Initially declining from 10.72 in 2006 to a low of 5.02 in 2009, it suggested the share price was relatively undervalued relative to operating profit during the financial downturn. Post-2009, the ratio generally increased, peaking at 14.76 in 2015, which may indicate the share price appreciated faster than operating profit during that period, possibly reflecting heightened market expectations or optimistic investor sentiment. The ratio declined to 8.17 by 2017, suggesting either a recalibration of market valuation or substantial gains in operating profits relative to price increases, aligning the valuation more closely with operating profitability.

In summary, the data reflects a company that experienced a financial setback around 2009 but demonstrated strong recovery and growth in both share price and operating profit per share thereafter. The P/OP ratio’s volatility highlights varying market perceptions of value relative to operational performance, with a notable peak suggesting possibly elevated valuations preceding a stabilization phase. The significant growth in operating profit per share towards the end of the period underpins the share price appreciation, indicating improved underlying business fundamentals.