One FTSE 100 stock that’s on fire right now is Whitbread (LSE: WTB), the owner of Premier Inn. This year, the share price has risen over 40%.
I’m quite bullish on the travel industry as consumers are generally spending their money on experiences instead of goods at the moment. Should I buy some Whitbread shares for my ISA? Let’s discuss.
Well placed in 2023
Looking at Whitbread today, there’s a lot to like about the stock, in my view. For a start, the company is well placed in the current economic environment.
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In 2023, people are desperate to travel. But they also want to keep costs down due to inflation. Whitbread’s Premier Inn – which offers smart, stylish rooms at value – is the perfect solution.
And this is reflected in the company’s recent financials. For the 13 weeks to 1 June, Premier Inn’s total sales were up 18% year on year.
“In the UK, our market leading brand and value-led customer proposition is continuing to deliver impressive revenue growth and a healthy RevPAR (revenue per available room) premium versus the wider M&E (midscale & economy) market,” said CEO Dominic Paul, in the most recent trading update.
It’s worth noting that Premier Inn is also benefitting from the decline of smaller independent hotels, which have struggled to cope with higher costs and labour shortages.
Higher share price targets
Secondly, there’s been some really bullish broker/analyst activity here recently. This month, a number of brokers have raised their share price targets for the hotel operator.
On 1 September, Jefferies raised its target price to £44 from £42. Meanwhile, on 13 September, JP Morgan raised its target price to £46p from £44. Both of these targets are well above the current share price.
The consensus earnings per share (EPS) forecast for the current financial year (ending 2 March 2024) has also been steadily rising. Over the last month, it has climbed 5.2p to 188.8p.
Rising EPS forecasts and share price targets can have a very healthy impact on a company’s share price.
Share buybacks
Another thing I like about Whitbread is that the company is buying back shares. This will reduce the number of shares on the market and most likely push earnings per share upwards.
Time to buy?
On the downside, the stock doesn’t look so cheap right now. Currently, the forward-looking price-to-earnings (P/E) ratio here is about 19.
I don’t see much potential for multiple expansion from that level. So for the shares to keep rising, we’ll need to see earnings move higher.
Another risk is the lack of geographic diversification here. Premier Inn only operates in a handful of countries, so it’s not as diversified as bigger hotel operators like InterContinental Hotels (which I recently invested in).
All things considered however, I think this stock has a lot of appeal.
If I didn’t already have a position in InterContinental, I’d definitely consider buying Whitbread shares for my ISA.
