Back to top

BTI vs. JAPAY: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors interested in Tobacco stocks are likely familiar with British American Tobacco (BTI - Free Report) and JAPAN TOB INC (JAPAY - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.

British American Tobacco has a Zacks Rank of #2 (Buy), while JAPAN TOB INC has a Zacks Rank of #4 (Sell) right now. 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. But this is just one factor that value investors are interested in.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

BTI currently has a forward P/E ratio of 8.94, while JAPAY has a forward P/E of 12.85. We also note that BTI has a PEG ratio of 0.94. 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. JAPAY currently has a PEG ratio of 3.21.

Another notable valuation metric for BTI is its P/B ratio of 0.89. 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, JAPAY has a P/B of 1.96.

Based on these metrics and many more, BTI holds a Value grade of B, while JAPAY has a Value grade of D.

BTI has seen stronger estimate revision activity and sports more attractive valuation metrics than JAPAY, so it seems like value investors will conclude that BTI is the superior option right now.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

British American Tobacco p.l.c. (BTI) - free report >>

JAPAN TOB INC (JAPAY) - free report >>

Published in