Investors with an interest in Tobacco stocks have likely encountered both British American Tobacco (BTI) and Altria (MO). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
British American Tobacco and Altria are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BTI has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
BTI currently has a forward P/E ratio of 9.69, while MO has a forward P/E of 9.88. We also note that BTI has a PEG ratio of 1.32. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. MO currently has a PEG ratio of 1.98.
Another notable valuation metric for BTI is its P/B ratio of 1.06. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, MO has a P/B of 11.73.
These metrics, and several others, help BTI earn a Value grade of A, while MO has been given a Value grade of C.
BTI stands above MO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BTI is the superior value option right now.
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British American Tobacco p.l.c. (BTI) : Free Stock Analysis Report
Altria Group, Inc. (MO) : Free Stock Analysis Report
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