Sage Investment Club

Image source: Getty Images Since the beginning of the year, the Whitbread (LSE: WTB) share price has been rising. And it’s up by around 20% since the markets reopened after Christmas. But that gain may not have helped long-term shareholders to get ahead by much. Over the past year, the rise is about 4%. And the stock languished at lower levels for most of 2022. A growing hotel chain The hospitality business owns the Premier Inn hotel chain and is expanding operations in the UK and Germany. But the pandemic hampered operational progress. And the situation underlines the cyclical nature of the business and its vulnerability to general economic setbacks. Nevertheless, Whitbread has been telling us for some time that the recovery and growth in its operations has been going well. In fact, throughout 2022 every trading update mentioned that the business was performing ahead of its sector.  But it looks like investors finally got the message this year. And a bullish third-quarter trading update released on 12 January appears to have pushed the share price higher still. The firm’s outgoing chief executive, Alison Brittain, said in the update that Premier Inn delivered a “strong”performance in the quarter both in the UK and Germany. Indeed, overall like-for-like sales for accommodation grew by almost 23% year on year. And when compared to pre-pandemic trading year to March 2020, sales came in nearly 27% higher. A bullish outlook Looking ahead, the company said it has an “encouraging” forward-booked position in the UK. And the directors expect pricing to remain strong. Meanwhile, there are plans to further expand the estate. And they’re “confident” in the outlook for both the UK and German operations. But there’ll be a new chief executive at the helm to steer the company through its next phase of growth. Dominic Paul formally joined the board on 17 January. And my guess is the appointment of new blood at the top of the organisation might be a factor that added to the strength in the share price this year. I’m a fan of periodic change in management teams. But only after directors have served for a decent amount of time. And Alison Brittain was the chief for around seven years — which is quite a long time to hold a high-pressure position. Renewed drive and ambition? I reckon new leaders can bring with them renewed energy, drive and ambition. Most top managers are keen to make their mark by scoring recognisable achievements and driving a business forward. So, the appointment of a new chief executive here may prove to be good for shareholders. Meanwhile, City analysts predict a modest single-digit percentage increase in earnings for the trading year to March 2024, and a decent double-digit hike in the dividend. But set against those expectations, the anticipated dividend yield is only around 2.1%. And the forward-looking price-to-earnings ratio is almost 22. That’s not a cheap valuation. I’m interested to follow the underlying growth story here. But the stock is not an obvious buy for me right now.

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