Down 56% since the pandemic, could this iconic British name be the FTSE 250’s biggest bargain?
The FTSE 250 has a much more domestic focus than the big dog, the FTSE 100, whose operations and revenues largely come from abroad. Therefore, anyone looking for the best and brightest British companies would do well to look for promising stocks on Londonâs smaller index.Â
One of the more recognisable names one can see is that of Wetherspoons (LSE: JDW). The pub chain has grown from a single pub in North London to nearly a thousand locations up and down the country (and a few in Ireland).
With the market cap at a relatively small £800m, could there be plenty more growth ahead? Will the firm’s cheap price and economies of scale allow it to dominate moving forward? Is Wetherspoons stock one of the best FTSE 250 buys at the moment?
Clucking good
With inflation sticky and cost of living still top of mind, Wetherspoonâs wafer-thin margins could enable it to gobble up more market share. I doubt too many would be surprised to learn âSpooniesâ offers cheap beer. But a few might be surprised by its branching out to other cheap delicacies.
A high street browser might bemoan the five or six pounds expected for a drink from most coffee chains nowadays. Well, they could wander into Wetherspoons instead and pick one up for £1.73! A coffee for less than two quid? What is this, 2005? Surely the cup is too small to be satisfying? Doesnât matter! That price comes with unlimited refills.Â
On earnings calls, management often mention the targeting of coffee, soft drinks, and food as a growth avenue. In the last quarterâs earnings, Chair Tim Martin said breakfasts were selling like hot cakes. Chicken dishes, apparently, put in a âclucking good performanceâ!
Out of love
This pivot towards non-alcohol products might, however, be more about necessity than opportunity. A recent drag on the sector has been declining consumption because of changing trends among the Gen Z population and the uptake of weight loss drugs like Wegovy. Alcohol drinks titan Diageo has lost half its value in just a couple of years. Could a similar fate be waiting for Tim Martin’s company?
Could alcohol be in terminal decline? Will the Wetherspoons share price ride on the coattails of the trend? The FTSE 250 firm is not growing like it used to, thatâs for sure. Pubs are still being opened across the country, but the number is not outpacing the closures like it did in the past. Pub closures are a trend that seems to be affecting the sector in general, of course.
I donât think the danger is enough for me to sell, but the British public falling out of love with booze is something any investor should take into account.
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More reading
- Down 21% since July! Should I add Wetherspoons to my Stocks and Shares ISA?
- The JD Wetherspoon share price falls in early trading despite a 4.5% increase in EPS
- Why now could be the best time to look at UK shares in 20 years
John Fieldsend has positions in J D Wetherspoon Plc. 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.
