A ridiculously cheap FTSE 250 stock to buy now

The FTSE 250 stock was impacted by the pandemic, but things are slowly turning around for it.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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. 

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.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »