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Stock Strategist

Imperial Is Royally Undervalued

The market's fascination with heated tobacco has left this company unloved.

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 Imperial Brands(IMBBY) repeatable model has been the guiding hand behind its recent strategy, and we think the company has executed well. Imperial’s stated aim is quality market share growth through six pillars, which it describes as a simple market-focused portfolio, sustainable brand investments, always-on pricing strategy, core range everywhere all the time, tailored custom solutions, and honest accurate learning.

The company has made great strides in portfolio optimization, reducing its total brand count 32% by the end of fiscal 2017; it targets a total reduction of 50% by 2020. Execution on the brand-migration program has been impressive, with a consumer-retention rate of around 95%. The streamlined portfolio should allow for more-focused brand investments and sustainable cost reductions.

Philip Gorham does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.