One-glance verdict
Undervalued
$109.79 our estimate vs market $55.63
Wall Street consensus: $70.43 (-35.8% lower than our fair-value estimate)
49% below our estimate, below the bear case
Fundamentals snapshot
British American Tobacco p.l.c.
BTI · NYQ · Consumer Defensive · Tobacco
Current price
$55.63
52-week range
$49.88 - $67.30
Market cap
$119.74B
Balance sheet
Watch
6.05x Adequate
Net debt $43.11B. 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 25% of its peers.
- Reward Free cash flow was positive in 4/10 years.
- Risk Operating margin compressed from 51.6% to 34.9% over 3 years.
- Risk Insider ownership is only 0.1% (peer median: 0.2%).
What this company does
British American Tobacco p.l.c.
British American Tobacco is one of the world's largest tobacco companies, selling famous cigarette brands like Newport, Pall Mall, and Lucky Strike. While most of its sales still come from these traditional products, it is heavily investing in newer smokeless alternatives like Vuse vapes and Velo nicotine pouches. This shift is important for the company's future as it seeks new sources of income while global smoking rates decline.
How the company got here
British American Tobacco (BAT) was formed in 1902 as a joint venture between the U.K.'s Imperial Tobacco and the U.S.'s American Tobacco Company to end a fierce trade war. For much of its history, it expanded globally by acquiring local tobacco companies. In the 1960s, the company diversified into non-tobacco businesses like paper, cosmetics, and even financial services, for a time owning Saks Fifth Avenue and Farmers Insurance. However, in the late 1990s, it refocused entirely on tobacco and nicotine, selling off its other businesses. A major turning point was the 2017 acquisition of Reynolds American, which gave BAT a massive presence in the United States.
What it actually does
British American Tobacco is one of the world's largest manufacturers of cigarettes, tobacco, and other nicotine products. You would recognize many of its traditional cigarette brands, such as Dunhill, Kent, Lucky Strike, Pall Mall, and Newport. In recent years, the company has also heavily invested in developing and selling alternatives to smoking. These newer products include Vuse for vaping, glo for heated tobacco, and Velo for nicotine pouches.
Combustibles
This is the company's largest and most established business, centered on traditional cigarettes that are burned when used. This segment includes globally recognized brands like Dunhill, Kent, Lucky Strike, and Pall Mall. While the company is focused on growing its newer categories, the combustibles business still generates the majority of its revenue (the total amount of money a company brings in from sales). The cash generated from this segment helps fund the development and marketing of its smokeless products.
Vapour
This category consists of electronic cigarettes, or vapes, sold under the global brand name Vuse. These are battery-powered devices that heat a liquid (often called an e-liquid), which may contain nicotine, to create a vapor that is inhaled. This business is a key part of the company's strategy to offer alternatives to traditional smoking. Customers buy both the reusable vaping devices and the disposable liquid cartridges or pods that go with them.
Heated Products
Sold under the brand name glo, these products represent a different kind of alternative to smoking. The system involves a device that heats specially designed tobacco or herbal sticks to a high temperature without burning them. This process creates an aerosol (a fine spray of particles) containing nicotine that the user inhales. The idea is to provide a tobacco experience with potentially fewer harmful chemicals than cigarette smoke.
Modern Oral
This segment features tobacco-free nicotine pouches sold under the brand Velo. These are small pouches containing nicotine, flavorings, and plant-based fibers that users place between their gum and lip. Nicotine is then absorbed through the lining of the mouth. This category is considered a modern, smoke-free way for consumers to use nicotine.
What management is betting on now
Management's primary focus is on transitioning the company toward a "smokeless world," with a goal of earning more than half of its revenue from non-combustible products by 2035. This strategy involves actively encouraging smokers of its traditional cigarettes to switch to what it terms "reduced-risk" alternatives like its Vuse, glo, and Velo brands. The company is investing heavily in research and development to improve these newer products and to provide scientific evidence to support their reduced-risk claims to regulators. This shift acknowledges the declining rates of traditional smoking in many parts of the world and aims to capture a leading position in the growing market for nicotine alternatives.
Price history
How the share price has moved
—
Loading price history…
Is it cheap or expensive?
Fair value $109.79 vs current price $55.63
Wall Street consensus is the average analyst price target: $70.43 (-35.8% lower than our fair-value estimate).
Our most-likely fair value is $109.79 a share — about 97.4% above today's price of $55.63, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Watch
Net debt $43.1B. Interest coverage 6.1x.
Net debt
$43.11B
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 $46.46B Interest coverage 6.05x This is the baseline the peer rows are being compared against.
Total debt $49.14B Interest coverage 9.41x +56% vs BTI Carries about 1.6x more debt cushion than BTI.
Total debt $24.58B Interest coverage 10.23x +69% vs BTI Carries about 1.7x more debt cushion than BTI.
Total debt $14.88B Interest coverage 7.65x +26% vs BTI Carries about 1.3x more debt cushion than BTI.
Total debt $1.22B Interest coverage 2.85x -53% vs BTI Carries about 2.1x less debt cushion than BTI.
Total debt $310.67M 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 25% of its peers.
-
Free cash flow was positive in 4/10 years.
-
Trades at 14.5x P/E vs peer median 26.2x (44.6% cheaper).
Risks
-
Operating margin compressed from 51.6% to 34.9% over 3 years.
-
Insider ownership is only 0.1% (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)
14.49x
Forward P/E
10.62x
P/B
9.78x
P/S
4.65x
EV/EBITDA
56.70x
PEG ratio
1.41x
Profitability
How much profit each dollar creates
Gross margin
82.7%
Operating margin
34.9%
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
$46.46B
Total cash
$3.36B
Growth
How the business has been compounding
Revenue TTM
$34.16B
Revenue 5Y CAGR
-2.5%
EPS TTM
3.84
EPS 5Y CAGR
6.1%
Cash flow
How much cash the business throws off
Operating CF TTM
$8.40B
Free CF TTM
$7.47B
FCF margin
21.9%
Dividend
Shareholder payout
Yield
6.0%
Payout ratio
84.5%
Last ex-div date
2026-10-02