Whitbread (LSE: WTB) owns the Premier Inn hotel chain. And the share price had done well this year. 

That’s not surprising. There’s a robust underlying growth story here. And the most-recent outlook statement in January was positive.

But when the market falls started last week, the stock began a plunge that may see it reverse its gains for the year. 

As I write, the shares are down around 8% from last week’s highs. But to put that move in context, at 2,852p, they are still about 8% higher than they were a year ago.

The backstory here is one of recovery and growth in the business. And there’s a big market opportunity in Germany for the company. But so far, the firm’s market share abroad is still small compared to its operations in the UK and Ireland.

Near-term uncertainty

The recent stock weakness is likely due to uncertainty in the near term. We can’t deny the inherent cyclicality in the sector. And there’s no doubt the business would come under pressure if the macro-economic picture deteriorated.

I reckon such fears have led to the recent general stock market weakness taking the stock lower.

But the Premier Inn brand is a strong one. And I can see three reasons to buy the stock now if an investor’s deeper research suggests an attractive opportunity.

The first is that operational recovery since the pandemic has been robust. And the underlying growth story is attractive.

Secondly, new chief executive Dominic Paul arrived on 17 January. And change at the top may lead to new ideas and vigour to drive the growth strategy forward.

Thirdly, the outlook was positive as recently as 12 January when the company delivered its third-quarter trading update.

And despite the fickle movements of the stock market and share prices, business operations tend not to be as volatile.

A positive outlook

The directors described an encouraging forward-booked position in the UK. And they said they expect pricing to remain strong.

On top of that, further growth in the estate is on the cards. And the top managers were confident in the outlook for the current trading year to 3 March 2024.

Meanwhile, the outlook for German hotels business was very encouraging with the directors committed to the long-term strategy there.  

However, it’s hard to predict how far the current stock market reversal will go. But the lower the Whitbread share price falls, the more attractive the stock becomes. And that’s true as long as the news from the business doesn’t decline in quality.

The full-year results report is due on 25 April. And we’ll likely get more up-to-date information about trading and the outlook then.

So I reckon it’s worth putting the stock on a watch list now. And I’d dig in with further and deeper research in readiness. 

If the next piece of news from the company is encouraging, we could be seeing value building here. And that situation may lead to the emergence of a compelling stock market opportunity.

The post 3 Reasons to buy the Whitbread share price dip appeared first on The Motley Fool UK.

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Kevin Godbold 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.