The most optimistic shareholders still hope that US federal agencies will bang the table and bring order to the highly fragmented vape market. That would logically benefit BAT, which presents itself as the global leader in the segment with its Vuse franchise.
In June 2024, MarketScreener warned that the deleveraging target put forward by CEO Tadeu Marroco - the group's former CFO - should be treated with caution. Events have borne out our concern, since after an initial postponement the target has now been delayed another year.
Investors nonetheless have welcomed the launch of a share buyback program - raised another notch in 2026 - that they had long demanded. It remains modest, however, compared with the amounts the group pays out in dividends, which still amount to at least 2/3 of its profits.
Moreover, while these buybacks made perfect sense when the stock traded at a single-digit earnings multiple - and with a dividend yield in double digits or close to it - the recent rally changes the equation.
The share's valuation has indeed risen sharply in recent months, even as a structural growth problem persists at BAT, which has not pulled off the NGP bet as well as Philip Morris. All else being equal, enterprise value now equates to between 13 and 15 years of free cash flow and a dividend yield of under 6%.
Nothing is very exciting here, and MarketScreener is clearly not alone in thinking so: billionaire Kenneth Griffin, the group's largest shareholder, who bought in at the pandemic lows, has since significantly cut his stake.
