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This FTSE 100 market leader isn’t the only stock I’d buy today

Whitbread (LSE: WTB) shares are currently trading over 10% below their recent highs. I view this as a great opportunity to buy into the owner of the UK’s biggest budget hotel brand, Premier Inn.

I also see great value on offer for investors checking-in to Elegant Hotels Group (LSE: EHG), the owner and operator of seven luxury hotels in Barbados.

Short-term headwinds

The Whitbread share price was comfortably above 5,000p little more than a month ago, but is currently nearer 4,500p. In its annual results, released at the end of last month, the company reported a decline in business and leisure confidence in the last quarter of its financial year ended 28 February, leading to weaker domestic hotel demand.

It further said: “This weakness has increased into March and April particularly in the regional business market, coinciding with an acute period of political and economic uncertainty in the UK.”

Compelling long-term growth story

Despite the short-term market challenges, it’s the long-term growth story for the Premier Inn business that I find compelling. There’s still plenty of expansion to come in the UK, and the company is accelerating its plans to replicate the domestic, multi-decade success story in Germany. This has been helped by the £3.9bn sale of its Costa Coffee business to The Coca-Cola Company earlier this year.

The main reason I’d be happy to buy Whitbread’s shares today (on 19 times forward earnings with a 2.1% dividend yield) is the prospect of strong, multi-decade earnings and dividend growth. However, there are also possibilities of more immediate returns. City analysts reckon Whitbread’s current valuation makes it attractive for a takeover bid, while activist investor Elliott Advisors is reportedly agitating for the company to unlock value from its £5.8bn property portfolio.

Eye-catchingly cheap

Over in Barbados, Elegant Hotels reported a solid performance in its half-year results today — despite a competitive market — with a 5% increase in underlying profit before tax on 3% higher revenue. Management said it has good visibility of bookings for the remainder of the year, and is comfortable with current market expectations.

The stock trades at an eye-catchingly cheap 7.5 times forward earnings at a share price of 71.5p (up 3.6% on the back of today’s results). A prospective 4.7% dividend yield also spells value, as does the company’s freehold-property-backed implied net asset value of 156p a share.

Well-backed business

Despite it being a smaller company — its market capitalisation is £63.5m — I find it hard to understand why the stock is trading at such a cheap valuation.

Renowned entrepreneur Luke Johnson is a non-executive director and 12.5% shareholder (albeit his Midas-touch reputation has been somewhat tarnished by the recent collapse of Patisserie Valerie’s parent company). And Elegant’s shareholder register is also packed with blue-chip institutional names, including the asset management arms of Schroders and Close Brothers.

Looking to the future

The company plans to expand in a measured manner, both on Barbados and further into the Caribbean, whilst ensuring its balance sheet remains robust. With its cheap valuation, nice dividend, and growth prospects, I rate the stock a ‘buy’. Indeed, I think it has potential to be a long-term big winner for investors today.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Schroders (Non-Voting). 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.