1 cheap FTSE 100 recovery stock that could be a great buy in 2022

The FTSE 100 stock is still trading at below pre-pandemic levels but 2022 could see a turnaround in its fortunes, making it a potentially great buy in 2022. 

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Recovery stocks have come a long way since the pandemic started almost two years ago. But some of them have far more ground to cover before they can get back to the highs they last saw in early 2020. A case in point is the FTSE 100 hospitality stock Whitbread (LSE: WTB), which is still trading some 35% below these levels. 

This might just be the opportunity for me to buy the stock, while it is still cheap. 2022 could be a better year for travel than last year was, which in turn could support companies like Whitbread. As a result, its share price could start inching up. In fact, I am surprised it has not done so already. On the contrary, its share price was down by almost 2% at yesterday’s close after it released its trading statement yesterday.

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Positive trading statement for Whitbread

To my mind, though, there are plenty of positives in the company’s trading statement. In the third quarter of its current financial year (FY22), ending 25 November 2021, the company reports “Continued market outperformance”. Further, it points out that its budget hotels segment of Premier Inn reported sales growth of 10.6% from the same time in FY20, which is the comparable period from before the pandemic. Total sales in the UK were up 3.1% for the company and it is also cashflow positive.

It also sounds positive about the next financial year, which is expected to have less Covid-19 related restrictions. Specifically, it sees Premier Inn’s revenues returning to pre-pandemic levels. It does not say anything about turning profitable, though. If that happened, I reckon its share price could rise fast from current levels. Analysts are positive, though. As per a Financial Times compilation, on average they expect Whitbread to report a small profit in FY23, though these levels are expected to still be below the pre-pandemic numbers.

Risks to the FTSE 100 stock

I think this bodes well for the FTSE 100 stock in 2022. But there are risks too. The biggest one of course is the lingering pandemic. We really do not know what happens next, even though we could hope for the best based on the progress made so far. Another fast rising risk is inflation, which is also mentioned in the company’s latest update. It expects its sector inflation rate to range between 7% and 8% in 2022, which it says could impact its cost base. In particular, rising prices could impact its ability to clock profits. 

What I’d do

Based on my assessment of the risks surrounding the stock, I would wait and watch for developing trends on Covid-19, inflation, and its own performance. Its next full-year result in particular, could throw light on where the company is truly at and get a sense of where it is headed. There are still a few more months to go before those numbers come in. I will make a call then. Until then, it is on my investing watchlist.  

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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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