3 Overlooked Tobacco Stocks Quietly Making Investors Rich
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Tobacco stocks have a bad reputation. Investors with a particular set of ethics tend to veer away from them because the companies’ products are known to be detrimental to people’s health. However, if you take an objective view, buy-rated tobacco stocks can be good investments. That’s because, though not strictly considered as consumer essentials, tobacco products remain in massive demand despite wide-scale pushback.
Many tobacco companies are also pivoting toward less damaging forms of their products. That’s not to say that tobacco products are safe — not at all. Many countries and assemblies, including the United Nations, consider tobacco use one of the biggest public health threats in the world.
Still, the effort should be recognized — as should the potential returns for investing in tobacco stocks. Such is the nature of business.
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So, today, I’ll take an impartial look at three of the top tobacco stocks to see if they’re worth your consideration.
To generate this list, I screened the market for tobacco stocks with the following criteria:
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Buy ratings from analysts and
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Positive net income growth in their last annual report.
Then, I sorted the results based on the highest to lowest net income growth. Here are the results:
Turning Point Brands (TPB)
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Known for its Clipper brand lighter and distributor of alternative smoking accessories and consumables, Turning Point Brands (NYSE:TPB) offers various smoking-related products in its various product segments, like:
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Zig-Zag segment: cigars, rolling papers and other related products.
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Stoker segment: chewing tobacco, moist snuff (smokeless) tobacco.
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Creative Distribution Solutions segment: nicotine-related products.
In FY23, Turning Point experienced a slight decline in consolidated net income and gross profit. This was primarily due to a low single- to double-digit decrease across all segments. Adjusted EBITDA also decreased by 2.4% year over year to $95.3 million.
However, despite slightly lowered sales, the company’s net income increased by 230.4%. Turning Point expects 2024’s adjusted EBITDA to end between $95 million and $100 million, signifying further optimism.
“Our outlook for 2024 is positive,” says President and CEO Graham Purdy, “ as we expect solid growth in our Zig-Zag and Stoker’s Products businesses.”
Analysts share that positive sentiment, as they rate TPB as a member of the “tobacco stocks to buy” list.
Altria Group (MO)
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Known as the owner of some of the tobacco world’s household names, Altria Group (NYSE:MO) is a holding company that owns brands like Marlboro cigarettes, Black and Mild cigars and other tobacco-related products through its subsidiaries.