Forget a cash ISA! FTSE 100 share Whitbread could help you retire early

Whitbread plc (LON: WTB) appears to offer stronger investment potential than the FTSE 100 (INDEXFTSE: UKX).

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The future for Whitbread (LSE: WTB) appears to be relatively encouraging, and this could allow it to outperform the FTSE 100. Its recent decision to sell Costa to Coca-Cola in a £3.9bn deal could provide it with improved financial standing, and allow it to develop its other brands – notably Premier Inn.

Looking ahead, the company could enjoy strong growth which allows it outperform the returns from a cash ISA, and also from the FTSE 100. However, it’s not the only FTSE 100 stock which could be worth buying. Reporting on Thursday was a company that could offer relatively resilient financial prospects.

Robust performance

The company in question is safety, health and environmental technology group Halma (LSE: HLMA). It has made good progress in the period from 1 April, with all of its sectors delivering organic revenue and profit growth at constant currency. Order intake was ahead of revenue, and was above the levels recorded from the sale period of the previous year.

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The company’s Medical and Environmental & Analysis segments performed well. The former benefitted from the actions taken to improve profitability in the latter part of the previous year. There was strong performance from Process Safety and Infrastructure Safety despite some modest reorganisation costs.

Halma’s growth was spread across its geographies, while its cash generation has remained strong. It has a solid acquisition pipeline, with it having made £3m of acquisitions during the period. With the financial capacity to engage in further M&A activity in future, its growth rate could remain robust. In fact, in the last five years the stock has delivered an annualised earnings growth figure of 10%. This suggests that its future prospects could be relatively upbeat.

Changing business

The prospects for Whitbread also seem to be relatively impressive. Its Premier Inn franchise is now set to be its key growth driver following the sale of Costa. The company has significant growth potential in the UK and internationally, with Germany being a market where the business sees opportunities for growth. This could catalyse its top and bottom lines, as well as help to reduce its reliance on the UK economy ahead of what may prove to be an uncertain period.

Of course, with Premier Inn being a budget hotel it may not experience a significant fall in demand should consumer confidence remain weak. Consumers may decide to trade down to cheaper options, and this could mean that demand for its rooms is more robust than is the case for the wider industry.

With Whitbread forecast to grow its bottom line by 7% next year, it may seem rather expensive trading on a price-to-earnings (P/E) ratio of around 20. However, with a track record of delivering strong growth and its Premier Inn franchise seemingly well-placed to deliver international expansion, it could perform well in the long run. As such, it may be worth buying at the present time.

Pound coins for sale — 31 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Peter Stephens owns shares of Whitbread. The Motley Fool UK has recommended Halma. 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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