Universal Corp /Va/ (NYSE: UVV)

Sector: Consumer Defensive Industry: Tobacco CIK: 0000102037
Market Cap 1.32 Bn
P/B 1.04
P/E 20.69
P/S 0.66
ROIC (Qtr) 4.58
Div Yield % 7.29
Rev 1y % (Qtr) -8.10
Total Debt (Qtr) 1.11 Bn
Debt/Equity (Qtr) 0.75
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About

Investment thesis

Bull case

  • Robust free cash flow of 61.04M exceeds capital expenditure of 39.67M by 1.54x, indicating strong organic growth funding capability.
  • Retained earnings of 1.20B provide full 1.88x coverage of long-term debt 640.15M, indicating strong internal capital position.
  • Tangible assets of 2.75B provide robust 14.29x coverage of other current liabilities 192.63M, indicating strong asset backing.
  • Retained earnings of 1.20B provide strong 6.23x coverage of other current liabilities 192.63M, indicating earnings quality.
  • Operating cash flow of 100.71M provides strong 6.32x coverage of operating expenses 15.93M, showing operational efficiency.

Bear case

  • Operating cash flow of 100.71M barely covers its investment activities of (39.67M), with a coverage ratio of -2.54, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 85.23M against inventory of 990.64M, the 0.09 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 100.71M provides thin coverage of dividend payments of (80.88M) with a -1.25 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Free cash flow of 61.04M represents just -0.74x of debt issuance (82.06M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • High depreciation of 55.42M relative to operating cash flow of 100.71M, which is 0.55x suggests significant maintenance capital requirements affecting free cash flow.

Peer comparison

Companies in the Tobacco
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 PM Philip Morris International Inc. 286.67 Bn 25.26 7.05 48.84 Bn
2 MO Altria Group, Inc. 132.50 Bn 30.66 5.43 25.70 Bn
3 BTI British American Tobacco p.l.c. 130.31 Bn 12.42 3.77 47.39 Bn
4 RLX RLX Technology Inc. 2.87 Bn 26.73 5.63 0.02 Bn
5 TPB Turning Point Brands, Inc. 2.19 Bn 81.36 10.62 0.30 Bn
6 UVV Universal Corp /Va/ 1.32 Bn 20.69 0.66 1.11 Bn
7 ISPR Ispire Technology Inc. 0.17 Bn -4.78 1.75 0.01 Bn
8 XXII 22nd Century Group, Inc. 0.00 Bn -0.15 0.08 0.00 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.63 1.74
EV to Cash from Ops. EV/CFO 8.52 36.76
EV to Debt EV to Debt 1.70 0.92
EV to EBIT EV/EBIT 17.21 12.10
EV to EBITDA EV/EBITDA 11.84 31.94
EV to Free Cash Flow [EV/FCF] EV/FCF 10.26 53.50
EV to Market Cap EV to Market Cap 1.44 -53.22
EV to Revenue EV/Rev 0.95 3.60
Price to Book Value [P/B] P/B 1.04 5.34
Price to Earnings [P/E] P/E 20.69 21.35
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 1.05 1.31
Dividend Payout Ratio % Div Payout % (Qtr) 95.90 37.42
Dividend per Basic Share Div per Share (Qtr) 3.27 1.81
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 134.24 42.94
Interest Coverage Int. cover (Qtr) 2.81 -12.36
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 43.97 14.47
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -60.38 49.35
Dividend Growth (1y) % Div 1y % (Qtr) 0.93 2.17
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -28.39 30.18
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -15.69 2.41
EBIT Growth (1y) % EBIT 1y % (Qtr) -16.97 30.58
EBT Growth (1y) % EBT 1y % (Qtr) -21.56 17.61
EPS Growth (1y) % EPS 1y % (Qtr) -32.81 19.96
FCF Growth (1y) % FCF 1y % (Qtr) -12.21 -140.66
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -9.26 -1.72
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.96 0.56
Cash Payout Ratio Cash Payout (Qtr) 0.58 0.28
Cash Ratio Cash Ratio (Qtr) 0.11 0.92
Current Ratio Curr Ratio (Qtr) 2.91 2.85
Debt to Equity Ratio Debt/Equity (Qtr) 0.75 -1.43
Interest Cover Ratio Int Coverage (Qtr) 2.81 -12.36
Times Interest Earned Times Interest Earned (Qtr) 2.81 -12.36
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 9.00 -38.32
EBIT Margin % EBIT Margin % (Qtr) 7.12 -36.97
EBT Margin % EBT Margin % (Qtr) 4.59 -48.97
Gross Margin % Gross Margin % (Qtr) 18.20 26.54
Net Profit Margin % Net Margin % (Qtr) 2.90 -54.22