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Is British American Tobacco (BTI) a Great Value Stock Right Now?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is British American Tobacco (BTI). BTI is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 10.21, which compares to its industry's average of 12.97. BTI's Forward P/E has been as high as 13.64 and as low as 7.81, with a median of 11.61, all within the past year.

Investors should also note that BTI holds a PEG ratio of 1.45. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. BTI's PEG compares to its industry's average PEG of 1.65. Over the last 12 months, BTI's PEG has been as high as 1.70 and as low as 0.82, with a median of 1.48.

Another valuation metric that we should highlight is BTI's P/B ratio of 1.03. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 3.07. Over the past 12 months, BTI's P/B has been as high as 1.63 and as low as 0.76, with a median of 1.18.

These are only a few of the key metrics included in British American Tobacco's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, BTI looks like an impressive value stock at the moment.


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