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A ridiculously cheap FTSE 250 stock to buy now

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It is no secret that travel stocks have been some of the worst affected by the coronavirus. As we figuratively hunkered down while the pandemic raged, public transport services in particular came to a grinding halt. Among many others, this impacted the FTSE 250 stock Trainline (LSE: TRN), which sells rail and coach travel tickets online. But it seems that the worst may just be behind it now. 

Coming back to life

In its trading update released today, the company’s revenues increased 151% for the six months from March to August compared to the same time last year. Its ticket sales also increased 179% over this time. This was to be expected. There was virtually no travel during much of this time in 2020. By comparison, we had found our freedom by July this year. 

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The real good news to me is that it is getting back on track even compared to two years ago. Its latest ticket sales are at 54% of 2019 levels. Note that the progress has been made despite some restrictions still being around for much of these six months. 

Further, for the second quarter, which is the June-August period, the number is an even more encouraging 71%. Significantly, the UK consumer segment, which accounts for the bulk of its revenues, has returned to 95% of ticket sales two years ago. In other words, it is back to normal for the segment. 

Based on these developments, the company now expects to be profitable this year in terms of earnings before interest, taxes, depreciation, and amortisation, more commonly known as simply EBITDA. 

Risks to the FTSE 250 stock

It is not all blue skies ahead for the stock, though. There was news of a potential firebreak lockdown last week, though I have not seen any updates on that since. In any case, rising cases and particularly rising hospitalisations, despite huge progress on vaccinations, could reduce some travel demand as people prefer to take precautions. 

There is also speculation that commuter numbers may never go back to pre-pandemic days, now that the joys of working from home have been discovered. And significantly, the government plans to establish a state-owned railway organisation, which among other things will have its own online platform. The news impacted the Trainline stock initially, because there is no way of knowing what happens the impact to it will be when the government’s version comes into being. 

Would I buy the Trainline stock?

Nevertheless, I reckon that is some way off. And also, more and more companies are calling their employees back to the office. That leaves us with the risk of another pandemic surge. This should hopefully be easier to control as under-18s start getting vaccinated and booster shots become available too.  

In the meantime, Trainline’s share price is still 33% lower than its pre-pandemic highs. This is not something I can say for too many other stocks now. I think there is a case for buying the stock, while it is still down.

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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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