BTI - British American Tobacco: Recent Underperformance Is Not Indicative Of Value Here

2024-06-20 00:06:30 ET

Summary

• On a YTD basis, BTI has underperformed Altria and Philip Morris by double-digit total returns.
• Most of the reasons why BTI's share price has remained depressed are temporary.
• If we zoom into the details, we will understand that BTI is still set to deliver positive organic growth this year.
• Plus, so far this year, the underlying fundamentals have strengthened.
• In this article I elaborate on why, in my opinion, there is still a justified basis for going long BTI despite its recent underperformance.

Early this year I issued an article on British American Tobacco ( BTI ) arguing that the multiple is so low that it provides an inherent safety in terms of keeping the downside risk limited. Plus, the argument was that so depressed multiple warrants a very enticing entry point for investors to capture high yielding dividend streams. In addition, looking at the underlying business profile it was clear that the business is at a much safer position than what could be implied by the multiple (i.e., P/FCF of 5.1x)....

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