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If this doesn’t make you love tobacco sin stocks, nothing will…

According to an article published at Business Insider entitled “Packaged Goods With The Highest Margins“, tobacco products dominate in one particular measurement: Operating Margin: Smokeless tobacco has an operating margin of 61% while traditional tobacco (i.e. cigarettes) has an operating margin of 41%. By comparison, other products like homecare, coffee, and soup/sauces have a “mere” 29%, 26%, and 26% operating margin, respectively.

Operating margin is the ratio of operating income to overall sales. This is the amount of profit left over after variable costs but before interest and taxes. To put it bluntly: For every dollar that a smokeless tobacco company brings in from sales, 61 cents is profit (before interest and taxes); for every dollar that a traditional tobacco company brings in from sales, 41 cents is profit (before interest and taxes.

Obviously this is an average and it gets a bit muddled with some companies selling a variety of smokeless and smoking tobacco products, and other products, but it shows how tobacco companies can continue to cash in, in spite of aggressive taxation policies.


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