Risk Analysis: Is British American Tobacco p.l.c. a Value Trap or Safe to Buy?
NYQ · Consumer Defensive · Tobacco
Is British American Tobacco p.l.c. a safe investment right now?
British American Tobacco p.l.c.'s Altman Z-Score of 0 places it in the distress zone. Our DCF model estimates intrinsic value at $41.61, suggesting the stock is overvalued by 37%. Moat rating: 2.3/5 stars.
Could British American Tobacco p.l.c. go bankrupt? Altman Z-Score analysis
Insufficient data to calculate Z-Score.
- Below 1.8 — Distress Zone (high bankruptcy risk)
- 1.8 to 3.0 — Gray Zone (elevated uncertainty)
- Above 3.0 — Safe Zone (financially healthy)
What drives BTI's Z-Score?
| Component | Formula | Value | Weight | Contribution |
|---|
How has BTI's financial health changed over time?
| Year | Z-Score | Zone |
|---|
Source: Calculated from BTI's latest 10-K filing on SEC EDGAR.
What is British American Tobacco p.l.c. actually worth?
Fair value range: $4.94 — $69.83
Valuation Methods
| Method | Fair Value | Weight | Detail |
|---|---|---|---|
| Historical PE × Forward EPS | $69.83 | 50% | 13.2x avg PE (3 years) × $5.29 forward EPS |
| DCF (Discounted Cash Flow) | $19.03 | 30% | Two-stage DCF: $3.0B TTM FCF, 3.5% growth, 7.0% WACC |
| EV/FCF Multiple | $4.94 | 20% | TTM FCF × 14x multiple + net cash |
Assumptions & Data Sources
| Parameter | Value | Source |
|---|---|---|
| FCF Growth Rate (Stage 1) | 3.5% | 70% analyst consensus + 30% historical |
| Analyst EPS Growth (This Year) | 1.8% | Consensus (5 analysts) |
| Analyst EPS Growth (Next Year) | 8.2% | Consensus |
| Historical 5Y FCF CAGR | 0% | SEC EDGAR |
| Terminal Growth Rate | 2.5% | Long-term GDP proxy |
| Discount Rate (WACC) | 7.0% | CAPM (Rf=4.3% + 0.5*5.5%) |
| Net Cash / (Debt) | $-31,227M | Balance sheet |
| Base FCF (TTM) | $3.0B | Trailing 12 months |
| Shares Outstanding | 2,164,804,331 | Latest |
Sensitivity Analysis
| Growth Rate | 8% WACC | 10% WACC | 7.0% WACC | 13% WACC |
|---|---|---|---|---|
| 0% | $22.26 | $16.45 | $27.10 | $11.87 |
| 2.5% | $25.77 | $18.90 | $31.50 | $13.50 |
| 5.0% | $29.80 | $21.70 | $36.56 | $15.35 |
| 7.5% | $35.30 | $25.45 | $43.53 | $17.78 |
Free Cash Flow History
| Year | FCF | Growth |
|---|
Source: FCF data from SEC EDGAR filings. Price via Yahoo Finance.
Does British American Tobacco p.l.c. have a durable competitive advantage?
Moat rating: 2.3/5.
What makes up BTI's moat score?
ROIC Stability
ROIC variability over the past decade. Score: 2/5.
Gross Margin Trend
Gross margin trajectory over the past decade. Score: 3/5.
Switching Costs
Estimated customer lock-in based on margin level. Score: 2/5.
How stable is BTI's return on invested capital?
| Year | ROIC | Trend |
|---|
Source: ROIC calculated from SEC EDGAR filings.
Is British American Tobacco p.l.c.'s dividend safe?
Can British American Tobacco p.l.c. afford its dividend?
Payout ratio is 68.7%. FCF covers the dividend 0.0x. 40 consecutive years of payments.
British American Tobacco p.l.c.'s key financial metrics
| Metric | Latest | 1Y Ago | 3Y Ago | Trend |
|---|
Common questions about British American Tobacco p.l.c.
Is British American Tobacco p.l.c. at risk of going bankrupt?
British American Tobacco p.l.c.'s Altman Z-Score of 0 places it in the distress zone. This metric uses balance sheet ratios to predict bankruptcy probability within 2 years. A score below 1.8 signals distress, while above 3.0 indicates safety.
What is British American Tobacco p.l.c.'s intrinsic value based on DCF?
Our DCF model estimates British American Tobacco p.l.c.'s intrinsic value at $41.61 per share. The current margin of safety is -37.1%. This estimate is based on historical free cash flow trends and a risk-adjusted discount rate.
Does British American Tobacco p.l.c. have a competitive moat?
British American Tobacco p.l.c. receives a moat rating of 2.3 out of 5 stars, based on ROIC stability, gross margin trends, and estimated switching costs. A rating above 3.5 suggests a durable competitive advantage.
Is British American Tobacco p.l.c.'s dividend safe?
Our dividend safety analysis examines payout ratio, free cash flow coverage, and the company's streak of consecutive dividend payments to determine whether the current payout is sustainable.
FairValueLabs Disclaimer
All valuations, scores, ratings, and classifications on this page are produced by the FairValueLabs internal valuation system. They do not represent actual market value, guaranteed outcomes, or professional investment advice. These are analytical estimates for educational and research purposes only.
This is not financial advice. All data is sourced from SEC EDGAR public filings. Always consult a qualified financial advisor before making investment decisions.
Last updated: Apr 20, 2026. Data sources: SEC EDGAR (financial statements), Yahoo Finance (market data, analyst consensus). Data may not reflect the most recent quarter.
BTI analysis methodology: How we calculate fair value, Z-Scores, and moat ratings