Is British American Tobacco Stock a Long-Term Buy?

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Tobacco shares are not for everyone. The fact that they deal with vices and the sale of addiction products is not polite for some, while others go beyond in favor of the fastest growing companies. British American tobacco (NYSE: BTI) It is one of the most prominent players in this field, and it is characterized by a global presence and a variety of brands for cigarettes and nicotine products that are free of smoking.

The 7 % profit distributions return provides short -term revenue for the company, which investors can estimate when market fluctuations rise, as recently happened.

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But can you trust the American -British tobacco as a long -term contract in your wallet? There are some risks, but the upward trend may surprise you.

It has been a particularly difficult contract for American -American tobacco, also known as Bat. Shares shares for years, as the company has worked with two basic challenges:

Early stages from one at the industry level from cigarettes turn to smoking nicotine products.
The consequences of excessive payment of inclusion with Reynolds American in 2017, including deleting $ 31.5 billion, non -cash on American cigarette brands in late 2023.

Now dust settles.

Tobacco companies are transmitted to electronic cigarettes (vapes), hot tobacco, nicotine cows, and competing with American American tobacco. The neutral organic sales of the currency of the new category products grew by 8.9 % in 2024, increasing to 17.5 % of the total revenue. British American tobacco leaves backward Philip Morris International In its smoking -free efforts, but before that Altria GroupWho is still adopting an overwhelming majority on Marlburo’s cigarettes in the United States

Configrible cigarette sizes decrease, but bats increase prices to compensate for losses – a classic tactic for tobacco companies.

Continuous growth in the products of new categories and stable cigarette revenues can lead to modest but long -term growth. The administration expects the growth of the neutral revenues of the annual currency by 3 % to 5 % starting in 2026. This will not light the world over the fire, but it is a front from a brutal extension.

The beauty of the American American tobacco is that you do not need to grow a bulletin to produce excellent investment returns.

British American tobacco profits give 7 %. If the growth targets reach and maintain profit margins, the company can generate total annual revenues from 10 % to 12 % in the long run, and this without the reinvesting profits. Pumping these profits return directly to the stocks, and you will see some serious complications over time.

Some investors question the sustainability of profits, but I do not see a problem.

British American tobacco achieved 7.9 billion pounds of free cash flow in 2024 and paid 5.2 billion pounds of profits. This is a rate of 66 %, leaving a large amount left. In addition, the company owns nearly a quarter of ITC, an Indian group with a market value of 5.38 trillion rupees, or nearly 63 billion dollars. This is one of the valuable assets of BAT, and profits are granted – a higher financial priority to tobacco companies to start – an additional safety net.

Correct or wrong, stock prices can affect how investors offer shares. British American tobacco increased by 43 % during the past year, but fell 25 % from a decade.

Fortunately, the last momentum of the stock seems to be the beginning of a new era. The percentage of British prices in British tobacco reached its climax at about 24 at the end of 2017. It is slowly not bound for years, and it is a major shareholder in the poor performance of the stock.

American American tobacco has reached less than profits less than 8 times early last year, after its massive removal. Now, with a brighter future in the future, buy the market. The arrow’s evaluation has increased, but it is still less than 10 times 2025 profit estimates. Investors may not expect shares to return to profits 24 times any time soon, but the current price is at least reasonable.

The shareholders should be able to enjoy the returns in line with the company’s growth and profit distributions forward. It should make investors in the long run very happy.

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Justin Bob has no position in any of the mentioned shares. The American American Tobacco PLC and Philip Morris International, recommends the following options: Long January 2026 $ 40 calls to British American tobacco and the shortcut of January 2026 $ 40 to American American tobacco. Motley Fool has a disclosure policy.

Are American American tobacco shares a long -term purchase? It was originally published by Motley Fool

2025-04-28 16:05:00

0 4 minutes read