BTI
British American Tobacco p.l.c.
$65.36
Stable Earnings Power
80%
P/Adj-EPS × Normalized Multiple
Moderate
·
Conviction
Undervalued
Trading 34.4% below fair value
You pay
$65.36
Bear
$82.05
Fair
$99.63
Bull
$117.21
Bear
$82.05
+25.5%
$7.03 × 14x P/E
Fair
$99.63
+52.4%
$7.03 × 17x P/E
Bull
$117.21
+79.3%
$7.03 × 20x P/E
Key Value Driver
Normalized P/E multiple (17x base case)
Implied Market Multiple
9.3x
Summary
Our base-case estimate uses a valuation based on adjusted earnings per share and a normalized price-to-earnings multiple. We then blend that result with the average analyst price target of $40.00 from 18 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $99.63 per share.
Warnings
The company's reported profits differ from official accounting profits by 50%. Check what costs are being left out of the adjusted number.
Dividend-based valuation: $63.09 (below our primary estimate by 47%). Large gaps may signal the dividend doesn't reflect full earning power.
Wall Street's average price target is $40.00 (from 18 analysts). Our estimate is 199% above the consensus -- consider that gap carefully.
Financial statements were converted from GBP into USD using GBPUSD at 1.3440 USD per GBP.
Key Risks
- Growth DCF inappropriate — terminal value assumptions dominate
- EV/EBITDA misleading for regulated businesses where capex is mandated
- Regulatory risk is a fat tail not visible in normal multiples