Is this FTSE 100 stock a steal right now?

Whitbread stock is rising after better than expected interim results. Charles Archer considers whether to add more of its share to his portfolio.

| 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.

macro shot of computer monitor with FTSE 100 stock market data in trading application

Image source: Getty Images

Whitbread (LSE: WTB) is a FTSE 100 stock I’ve held for years. And I’ll hope to hold it right up to retirement. That’s because it’s the owner of Premier Inn, Beefeater, Brewer’s Fayre and Table Table. And it also used to own Costa Coffee, before selling the outfit to Coca-Cola in the pursuit of cash to fund further growth. I think this is an extremely resilient brand portfolio that appeals to consumers at multiple price points.

At 3,326p today, its share price is up 173p in the past five days. It’s also increased from when I last considered the stock back in June. And over the past year, it’s up a whopping 58%. Of course some perspective is important. The company was hit hard by the pandemic. Its restaurant chains were forced to close, and overnight hotel stays were banned. On 21 February 2020, the Whitbread share price was 4,769p, and a month later, it had hit a low of 2,341p. And by September 2020, it was 2,062p. So while the share price may have recovered some ground, it’s still 30% lower than its pre-pandemic price. But I think if the economic recovery continues, it could get back there by this time next year.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Interim results

The FTSE 100 stock published strong interim results on Tuesday. Revenues in H1 hit £661.1m, more than double the £250.8m reported in the same half last year. However, this was still 39% below pre-pandemic levels. This was because only essential business guests were permitted to stay in hotels until 17 May, and restrictions weren’t completely lifted until ‘Freedom Day’ on 19 July. But in September, accommodation sales were up 9.7% year-on-year.

And encouragingly, Whitbread reported a loss of only £56.6m, which was £310.8m less than the loss reported last year. And it’s worth bearing in mind that as a hotelier and restaurateur, many of the fixed costs are inescapable. However, the group made a £235.6m profit before the pandemic. And the company’s lenders have banned dividend payments until things improve, which isn’t expected to be until at least March 2023. But I’m a long term investor. That’s no time time at all for a stock I’ll hopefully be holding until retirement.

FTSE 100 stock’s future

Now that the pandemic seems under control (at least for now), Whitbread is finally starting to see some upside. But it’s not immune to the challenges faced by every other FTSE 100 firm. The lack of labour, increased raw material costs and lorry driver shortages are all putting pressure on the company, at a time when it’s seeking to minimise costs. It’s had to spend £23m on increasing salaries and paying out bonuses.

But its expansion into Germany is going well. “Total open and committed pipeline is now at 73 hotels,” and German revenue is up 197.3% over FY20. Room occupancy grew to 47% in Q2, and then to 60% in August and September. And the company remains “confident in our ability to execute acquisitions at good returns in Germany”.

Of course, in this inflationary environment, the current economic recovery remains fragile. And the pandemic is not over yet. Another lockdown this winter would spell short-term disaster for Whitbread. But I think the current price point is still very attractive for me on the balance of risk and reward.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Charles Archer owns shares of Whitbread. 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

Thoughtful anxious asian business woman looking away thinking solving problem
Investing Articles

3 UK shares to buy in a stock market crash

Inflation and rising interest rates have our author on the lookout for a stock market crash. Here’s what he’s looking…

Read more »

Buffett at the BRK AGM
Investing Articles

3 Warren Buffett techniques to build my wealth

Our writer shares a trio of Warren Buffett investing habits he hopes can help him build his own wealth.

Read more »

Futuristic front of NIO car in Norwegian showroom
Investing Articles

Down over 50%, is NIO stock the best EV pick right now?

NIO stock has dipped over 50% in the past year. Does this create the perfect opportunity to buy or are…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Aviva shares are in demand. Should I buy too?

Hargreaves Lansdown investors were piling into Aviva shares last week. This Fool is asking whether he should join the queue.

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

3 reasons why I think the IAG share price could rally this year

Jon Smith writes about how improving risk sentiment could help the IAG share price this year, but not without risks…

Read more »

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Investing Articles

A passive income stock I’ve bought to supercharge my wealth!

I think this UK dividend stock is one of the best to buy for healthy long-term passive income. Here's why…

Read more »

British Pennies on a Pound Note
Investing Articles

3 hot penny stocks I’m buying in June!

With their exciting growth potential, penny stocks can be great investments. I've found three to buy next month based on…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

2 green dividend shares I’d buy with £500

Jon Smith explains two dividend shares with a focus on renewable energy that have caught his eye at the moment.

Read more »