{"id":80603,"date":"2023-11-04T08:37:42","date_gmt":"2023-11-04T12:37:42","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/british-american-tobacco-improved-performance-and-market-multiples-otcmktsbtaff\/"},"modified":"2023-11-04T08:37:48","modified_gmt":"2023-11-04T12:37:48","slug":"british-american-tobacco-improved-performance-and-market-multiples-otcmktsbtaff","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=80603","title":{"rendered":"British American Tobacco: Improved Performance And Market Multiples (OTCMKTS:BTAFF)"},"content":{"rendered":"
\n

<\/picture>
<\/figcaption><\/figure>\n<\/p>\n

Tobacco company British American Tobacco (NYSE:BTI<\/span>) (OTCPK:BTAFF) or BAT for short, has had a poor year at the stock markets, with a 23% decline in price year-to-date [YTD]. With a proportionally bigger price decline, even with a high trailing twelve months [TTM] dividend yield of 9.2%, its total returns are down by 19%. In absolute terms, its price is now down to multi-year lows, excluding the stock market crash of March 2020.<\/span><\/p>\n

This brings up the question, has it fallen low enough now to make the Dunhill and Pall Mall cigarettes manufacturer attractive? To assess this, here, I look at the company with reference to my first article on it over a year ago, when a host of macroeconomic factors, coupled with its own weak performance and its ongoing business transitions to non-combustible products made it a risky bet.<\/p>\n

\n

\"Price<\/span><\/picture><\/figure>\n
\n

Price Chart (Source: Seeking Alpha)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The difference a year makes<\/h2>\n

At this time last year, the risk of a recession loomed, inflation was still uncomfortably high and interest rates were on the upward trajectory. Now, however, the macroeconomy looks far more stable in general. The forecast recession didn’t happen, inflation has cooled down considerably and the interest rate hike cycle is essentially at its end.<\/p>\n

BAT’s own performance is also significantly improved. First, the company’s full year outlook itself is slightly better, with expectation of 3-5% organic constant currency revenue growth in 2023, compared to the 2-4% growth expectation for 2022 (Actual: 2.3%). While the revenue growth figures have come in at 2.8% for the first half of 2023 (H1 2023), which is lower than forecast, they are only slightly so. And there’s a possibility that the numbers can improve in H2 2023 considering that the company has kept its guidance unchanged.<\/p>\n

The real improvement, though, is in the earnings. Reported operating profit is up by 61.4% year-on-year (YoY) compared to a 25% decline in H1 2022, when they were impacted by a big on-off charge. The operating margin also improved significantly to 44.2% (H1 2022: 28.6%).<\/p>\n

The reported diluted EPS is also up by a huge 118% compared to a 42.9% fall in H1 2022, buoyed by a strong operating performance, a favourable currency conversion effect and the weak base that impacted operating earnings last year too.<\/p>\n

\n

\"Key<\/span><\/picture>
\n

Source: British American Tobacco<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Comparing BAT to peers<\/h2>\n

Since I last checked, the company also compares rather well to peers as well. The table below shows the comparison of revenue, EPS and P\/E ratios of the five biggest tobacco companies by market capitalisation, highlighting how BAT is placed among them. The following points are of note:<\/p>\n