Could this beaten down AIM stock be my best investment for 2022?

Young woman smiling putting a coin inside piggy bank as savings for investment

Things might have looked up for a number of stocks in 2021, but some lagged behind. Like this AIM stock, which is down by 2% over the year. It did make some gains earlier this year, but it has now lost those and is down by almost 5% from the start of the year. I am talking about the manufacturer of infection prevention and contamination control products Tristel (LSE: TSTL).

Tristel’s share price is up 18% in a month

However, the situation is now turning around for Tristel. In the last month alone it has risen some 18%. No points for guessing why. Covid-19 cases are on the rise again, driven by the newly discovered Omicron variant. This could lead to higher sales for its hospital surface disinfectants. We have seen this happen in the past as well. Right after the pandemic started, the company saw a spurt in demand for these products, which more than made up for a decline in sale of other products like medical device decontaminants. 

For this reason, Tristel has managed to record strong growth over the past couple of years despite the Covid-19 disruption for many other companies. In fact, as would be expected, its stock was one of the big gainers after the stock market crash of March last year. Since some of its segments also gain from normalising health and economic conditions, however, the stock continued to rise until early this year. Even after the correction of the past few months, the stock is still priced slightly higher than it was before the pandemic started.

2022 could be good for the AIM stock

Looking forward, I think 2022 could be a good year for Tristel too. Recently, it said that sales have picked up for it across geographies as normal services to hospitals have resumed. This could have impacted the stock positively anyway. But now that we are looking at another potential Covid-19 wave, I think its financial performance could remain even more elevated. Its stock price has already been on the rise in the past month, as I was saying earlier. 

In any case, as a defensive stock it is one to consider making an investment in during uncertain economic times. Even before the Omicron variant came about, economic recovery was quite slow. For instance, the UK barely grew in October from the month before. And the same could have continued in the foreseeable future as well. Now, with the new variant and fears of another lockdown around, the future looks even more grey. 

My assessment

While this does explain the AIM stock’s current popularity, I do see its valuation as a stumbling block for me. It has a high price-to-earnings (P/E) ratio of 78 times. If we go into another lockdown, I reckon it is possible that its share price could rise anyway. It reckon it could even become one of my best investments for 2022. But it is also possible that the whole Omicron situation blows over and recovery gathers steam. Despite its strong credentials, it could then weaken further as other stocks look underpriced by comparison. Because of this, I would wait and watch how the situation unfolds and make a call on whether or not to invest in the Tristel stock then. 

The post Could this beaten down AIM stock be my best investment for 2022? appeared first on The Motley Fool UK.

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Manika Premsingh 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.