Net Margin - British American Tobacco PLC (LSE:BATS)

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Price: 4 276 GBX -0.49%

Market Cap: 93B GBX

12.1%

Current

-0.3%

Average

9.2%

Industry

Net Margin measures how much net income is generated as a percentage of revenues received. It helps investors assess if a company's management is generating enough profit from its sales and whether operating costs and overhead costs are being contained.

Net Margin

12.1%

Net Income

3.1B

Revenue

25.6B

Net Margin Across Competitors

Country		Company	Market Cap	Net Margin
UK		British American Tobacco PLC LSE:BATS	93.9B GBP	12%
US		Philip Morris International Inc NYSE:PM	246.7B USD	22%
US		Altria Group Inc NYSE:MO	99.6B USD	38%
JP		Japan Tobacco Inc TSE:2914	10.3T JPY	7%
IN		ITC Ltd NSE:ITC	5T INR	41%
UK		Imperial Brands PLC LSE:IMB	25.6B GBP	6%
SE	S	Swedish Match AB F:SWMC	15.2B EUR	30%
KR		KT&G Corp KRX:033780	16.2T KRW	15%
CN		Smoore International Holdings Ltd HKEX:6969	75.3B HKD	9%
ID		Hanjaya Mandala Sampoerna Tbk PT IDX:HMSP	84.9T IDR	5%
IN		Godfrey Phillips India Ltd NSE:GODFRYPHLP	446.9B INR	18%

British American Tobacco PLC
Glance View

Economic Moat

None

Market Cap

93.9B GBX

Industry

Tobacco

British American Tobacco PLC (BAT) stands tall as a stalwart in the global tobacco industry, with a legacy intertwined with both innovation and controversy. Founded in 1902 as a joint venture between the UK’s Imperial Tobacco Company and the American Tobacco Company, BAT embarked on a trajectory that saw it become one of the world’s largest tobacco companies. Its expansive reach now spans continents, with over 200 brands in its portfolio. Managed from its London headquarters, BAT’s traditional business model revolves around the manufacture and sale of cigarettes and other tobacco products. The company generates revenue by leveraging its powerful distribution networks and established brand loyalty, with iconic names like Dunhill, Kent, and Pall Mall playing pivotal roles in its success. BAT’s profitability hinges on its ability to manage costs, scale its operations efficiently, and navigate the complex regulatory landscapes of diverse markets. In recent years, British American Tobacco has realized the need to adapt to changing consumer preferences and regulatory environments by venturing into the new category of ‘Reduced-Risk Products’ (RRPs). These include products like ‘heat-not-burn’ tobacco devices, vaping products, and oral nicotine pouches—its Vuse is a prominent brand within the e-cigarette milieu. By investing heavily in these areas, BAT aims to capture a share of the burgeoning demand for alternatives to traditional tobacco consumption, reflecting a strategic shift in its revenue streams. This pivot not only acknowledges the health risks associated with smoking but also attempts to maintain the company's market relevance amidst declining cigarette sales worldwide. BAT's story is one of adaptation and survival, striving to balance the demands of legacy products with the promise of forward-looking innovations, all while navigating the turbulent waters of public health discourse and regulatory scrutiny.

View BATS Analysis

BATS Intrinsic Value

What is Intrinsic Value?

Economic Moat is a concept popularized by Warren Buffett to describe a company's durable competitive advantage. It represents the 'moat' that protects a company from competitors and helps it sustain profitability over the long term. Our analysis of the past 10 years showed that companies with a wide economic moat significantly outperformed the market, delivering +645% returns compared to +189% for the S&P 500.

Our research into Economic Moat performance spans the past 10 years and focuses on companies with a wide economic moat. For this analysis, we calculated the average stock price returns of these companies, comparing them to the performance of the S&P 500 index over the same period.

The results were compelling: wide moat stocks achieved a remarkable +645% average return, compared to +188% for the broader market. This difference highlights the long-term benefits of investing in businesses that can maintain their market position and pricing power over time.

Note: This research does not account for survivorship bias. Past performance is not indicative of future results.

Determining whether a company has an economic moat requires both a deep dive into financial metrics and a qualitative assessment of its competitive position. Our analysts conduct a rigorous evaluation that focuses on identifying structural advantages that enable a company to sustain profitability and defend its market share over the long term.

The process begins with an analysis of a company’s historical financial performance. We assess how consistently the company has generated returns above its cost of capital and whether those returns have been stable or improving. However, financial performance alone doesn’t reveal the full picture. To understand the sources of these advantages, we evaluate five key drivers of economic moats:

Network Effect: We analyze whether the value of a company’s product or service grows as its user base expands. Platforms like payment systems or marketplaces benefit from this self-reinforcing.

Switching Costs: We assess whether customers face significant costs or disruptions when switching to a competitor’s product or service. High switching costs create customer stickiness and provide pricing power.

Intangible Assets: Strong brands, patents, and regulatory licenses can protect a company’s market position by creating barriers for competitors or enabling premium pricing. For example, a well-recognized consumer brand may command higher customer loyalty and margins.

Efficient scale: Occurs when a market is optimally served by one or a few players, making it unprofitable for new entrants to compete. This typically happens in industries with high fixed costs or geographic constraints, such as utilities or pipelines.

Cost Advantage: Companies with structural cost advantages can produce goods or services at a lower cost than their competitors, enabling them to offer competitive pricing or maintain higher margins. These advantages often arise from economies of scale, superior supply chain management, or proprietary technology. Firms like Walmart leverage their massive scale to negotiate better terms with suppliers, allowing them to undercut competitors on price.

By examining these factors in combination with a company’s financial performance and market positioning, we classify each company into one of three categories:

This rigorous evaluation ensures that our moat ratings are both comprehensive and reliable, giving investors the tools they need to make well-informed, long-term decisions.

The AI Assistant may sometimes provide inaccurate information.

Make your own investment decisions or consult a licensed financial advisor.

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British American Tobacco PLC
LSE:BATS