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BTI vs. MO: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2-min read

Investors interested in stocks from the Tobacco sector have probably already heard of British American Tobacco (BTI) and Altria (MO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Currently, British American Tobacco has a Zacks Rank of #2 (Buy), while Altria has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BTI is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

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Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

BTI currently has a forward P/E ratio of 8.98, while MO has a forward P/E of 9.62. We also note that BTI has a PEG ratio of 1.23. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. MO currently has a PEG ratio of 1.92.

Another notable valuation metric for BTI is its P/B ratio of 0.99. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, MO has a P/B of 12.45.

Based on these metrics and many more, BTI holds a Value grade of A, while MO has a Value grade of C.

BTI is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that BTI is likely 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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Zacks Investment Research