Shares in British American Tobacco (LSE: BATS) have performed extremely well in the last year, with them rising by 11% versus a fall of 11% for the FTSE 100. Many investors may feel that such a level of outperformance is unlikely to be repeated and that British American Tobacco will fall in value relative to the wider index.

However, this seems unlikely given the prospects for the business and its valuation. In terms of the former, British American Tobacco is making strong gains in the new and exciting e-cigarette space, with its Vype brand gaining traction in the lucrative market and setting the company up for long-term growth. And regarding the latter, British American Tobacco’s price-to-earnings (P/E) ratio of just 18 indicates that an upward rerating is on the cards since a number of its consumer goods peers trade on higher earnings multiples at the present time.

Furthermore, with uncertainty in global stock markets being rather high and likely to persist, the robust nature of British American Tobacco’s earnings profile could tempt more investors to buy. As such, far from worrying about bad news, investors in British American Tobacco could be in the middle of a purple patch.

Accentuate the positive

Similarly, Diageo (LSE: DGE) remains an excellent long-term buy. Certainly, emerging markets have been softer than many investors had hoped for in recent periods and this has acted as something of a brake on Diageo’s financial performance. In fact, Diageo’s earnings are due to fall by 1% in the current financial year and this seems to have weighed on investor sentiment somewhat, with Diageo’s shares rising in value by just 2% this year.

However, with Diageo expected to deliver a rise in earnings of 9% next year, it should soon be on track. And with the beverages company having a strong foothold in key markets such as China and India, its long-term growth outlook is hugely positive and should translate into a rapidly rising top and bottom line over the medium-to-long term.

Losing its fizz?

Meanwhile, Coca-Cola HBC (LSE: CCH) has been a disappointment this year, with its shares falling by 4% year-to-date. This may lead investors to surmise that it’s due to report a disappointing set of results in the near future, but with Coca-Cola HBC due to record a rise in earnings of 13% this year and a further 11% next year, investor sentiment could be about to rapidly improve.

That appears more likely since Coca-Cola HBC trades on a relatively appealing valuation. With its shares having a rating of 19.4, Coca-Cola HBC’s price-to-earnings-growth (PEG) ratio of 1.6 indicates that an upward rerating could be on the cards. And with the company having a yield of 2.3% from a dividend that’s likely to rapidly rise due to it being covered 2.2 times by profit, now could be a great time to buy a slice of the business for the long term.

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Peter Stephens owns shares of British American Tobacco. The Motley Fool UK has recommended Diageo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.