One-glance verdict
Undervalued
$122.21 our estimate vs market $61.05
Wall Street consensus: $70.37 (-42.4% lower than our fair-value estimate)
50% below our estimate, below the bear case
Fundamentals snapshot
British American Tobacco p.l.c.
BTI · NYQ · Consumer Defensive · Tobacco
Current price
$61.05
52-week range
$52.06 - $67.30
Market cap
$131.14B
Balance sheet
Watch
6.05x Adequate
Net debt $43.13B. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
2 Risks
3 rewards · 2 risks
- Reward Returns 13.4% on equity, ahead of 50% of its peers.
- Reward Free cash flow was positive in 4/10 years.
- Risk Operating margin compressed from 51.6% to 34.7% over 3 years.
- Risk Insider ownership is only 0.2% (peer median: 0.2%).
What this company does
British American Tobacco p.l.c.
British American Tobacco p.l.c. sells a variety of tobacco and nicotine products, like cigarettes and newer items such as e-cigarettes and nicotine pouches, to customers all over the world. The majority of their money comes from selling these traditional and newer nicotine products, which is important because it shows how they make their profits.
How the company got here
British American Tobacco (BAT) was formed in 1902 as a joint venture between the UK's Imperial Tobacco Company and the US's American Tobacco Company to sell each other's products outside their home markets. For a time, BAT also had significant financial services operations, acquiring insurance and retail companies. However, by the late 1990s, the company divested these non-tobacco businesses to focus solely on tobacco and nicotine products. This strategic shift led to major acquisitions, including the American Tobacco Company and Rothmans International, significantly expanding its brand portfolio and global market share. BAT has since evolved into one of the world's largest tobacco companies, operating in around 180 countries.
What it actually does
British American Tobacco manufactures and sells a wide range of tobacco and nicotine products to consumers globally. Their product categories include traditional cigarettes, as well as newer 'new category' products like e-cigarettes, heated tobacco, and modern oral nicotine pouches. The company operates in approximately 180 countries and its brands are recognized worldwide, with some of its most well-known cigarette brands including Dunhill, Kent, Lucky Strike, and Pall Mall.
Combustibles
This segment represents British American Tobacco's traditional business of manufacturing and selling cigarettes and other tobacco products that are smoked. These are the company's longest-standing products and have historically been the primary source of revenue and profit. Brands in this category include well-known names like Dunhill, Kent, Lucky Strike, Pall Mall, and Rothmans. While the company is shifting focus to newer products, combustibles remain a significant part of its business, generating substantial cash flow.
New Categories
This segment encompasses British American Tobacco's newer range of products designed as alternatives to traditional cigarettes, often referred to as 'smokeless' or 'next-generation' products. These include Vapour products (like e-cigarettes under the Vuse brand), Heated Products (such as the glo device), and Modern Oral products (like Velo nicotine pouches). The company is investing heavily in these categories, aiming to transition adult smokers to these potentially less harmful alternatives and grow this segment significantly.
What management is betting on now
British American Tobacco's core strategy is to transition from being primarily a cigarette company to a broader, multi-category nicotine business, with a vision to 'Build a Smokeless World'. Management is focused on accelerating the shift of adult smokers from traditional combustible products to their range of smokeless alternatives, such as Vuse, glo, and Velo. The company aims for these 'New Categories' to become a predominant part of its revenue by 2035, while continuing to leverage the strong cash generation from its traditional cigarette business during this transition.
Price history
How the share price has moved
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Is it cheap or expensive?
Fair value $122.21 vs current price $61.05
Wall Street consensus is the average analyst price target: $70.37 (-42.4% lower than our fair-value estimate).
Our most-likely fair value is $122.21 a share — about 100.2% above today's price of $61.05, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Watch
Net debt $43.1B. Interest coverage 6.1x.
Net debt
$43.13B
Interest coverage
6.05x
British American Tobacco p.l.c.'s profit covers its interest bill about 6.1 times over. which is stronger than most peers shown here.
Watch
Worse cushion
Baseline
Better cushion
BTI
BASELINE
British American Tobacco p.l.c.
Total debt $46.49B Interest coverage 6.05x This is the baseline the peer rows are being compared against.
Total debt $47.73B Interest coverage 9.41x +56% vs BTI Carries about 1.6x more debt cushion than BTI.
Total debt $24.06B Interest coverage 10.23x +69% vs BTI Carries about 1.7x more debt cushion than BTI.
Total debt $14.89B Interest coverage 7.65x +26% vs BTI Carries about 1.3x more debt cushion than BTI.
Total debt $1.23B Interest coverage 2.85x -53% vs BTI Carries about 2.1x less debt cushion than BTI.
Total debt $310.11M Interest coverage 3.76x -38% vs BTI Carries about 1.6x less debt cushion than BTI.
What you should know
The case for and against BTI
3 Rewards
2 Risks
Rewards
-
Returns 13.4% on equity, ahead of 50% of its peers.
-
Free cash flow was positive in 4/10 years.
-
Trades at 15.7x P/E vs peer median 22.3x (29.8% cheaper).
Risks
-
Operating margin compressed from 51.6% to 34.7% over 3 years.
-
Insider ownership is only 0.2% (peer median: 0.2%).
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
15.65x
Forward P/E
11.70x
P/B
10.61x
P/S
5.09x
EV/EBITDA
61.94x
PEG ratio
1.52x
Profitability
How much profit each dollar creates
Gross margin
82.7%
Operating margin
34.7%
Net margin
25.0%
ROE
13.4%
ROA
5.1%
Health
Liquidity and balance-sheet strength
Debt / equity
0.72x
Current ratio
0.83x
Quick ratio
0.48x
Total debt
$46.49B
Total cash
$3.36B
Growth
How the business has been compounding
Revenue TTM
$34.17B
Revenue 5Y CAGR
-2.5%
EPS TTM
3.90
EPS 5Y CAGR
6.1%
Cash flow
How much cash the business throws off
Operating CF TTM
$8.41B
Free CF TTM
$7.48B
FCF margin
21.9%
Dividend
Shareholder payout
Yield
5.5%
Payout ratio
84.0%
Last ex-div date
2026-12-29