I can see a strong case for buying both these FTSE 250 dividend and growth stocks today

Harvey Jones compares two FTSE 250 (INDEXFTSE: MCX) stocks enjoying fresh momentum.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Comparison website specialist Moneysupermarket.com Group (LSE: MONY) is racing ahead today, its share price up 8% after posting a 19% jump in first-quarter revenues. This continues the FTSE 250 group’s strong recent resurgence, with the stock up more than 20% in the last three months.

Strategic reinvention

Some of the gloss has come off the price comparison sector in recent years as early rapid growth slowed amid tough competition and market saturation. However, Moneysupermarket’s ‘reinvent strategy’ appears to be paying off as it targets  automated switching and tighter customer relationships in a bid to drive up repeat income.

Today CEO Mark Lewis said the strategy has delivered new branding and advertising “to remind everyone how we can help them with their finances and ‘get money calm’ “, helped by new products such as Credit Monitor.

Money motoring

Motor insurance is a key market and conversion numbers were up, partially offset by subdued trading in life insurance as competitors spent more on customer incentives, so overall total insurance revenues only grew 3% to £48.3m.

Revenues from its money services such as banking grew 9% to £25.3m, against a weak comparative quarter in 2018. Gas and electricity switching was particularly strong, due to attractive offers and the rapid jump in the new energy price cap.

Special dividend

Home services revenues (which include energy) grew 70% to £19.6m with total group revenues up 19% to £104.9m. Lewis warned that “exceptional” home services performance will moderate, but the outlook remains unchanged with the board confident of meeting expectations.

In February, the £2bn group proposed an enhanced £40m distribution, which today it confirmed will be made by way of a special dividend of 7.46p per share to be paid on 21 May, to shareholders on the register on 3 May.

Moneysupermarket now trades at a relatively pricey 20 times earnings and 4.9 times revenues. The forecast dividend is 3.8% with cover of 1.4. Earnings per share are forecast to grow 9% and 6% over the next couple of years and the group will have to avoid stumbles to justify its current valuation.

Compare and contrast

I thought it would be interesting to compare it with smaller rival Gocompare.com Group (LSE: GOCO). Also listed on the FTSE 250, this has a market cap of just £336bn. Last year it suffered a pretty calamitous crash, but is up almost 20% in the past month, boosted by news that chairman Peter Wood, who founded Direct Line, Esure and Sheila’s Wheels, has loaded up on 17.8m shares, lifting his total holding from 25.6% to 29.9%.

This was a real vote of confidence and led to speculation that he might even take GoCompare private. It is publicly traded for now and in contrast to Moneysupermarket still looks a relative bargain trading at 12.7 times earnings, and 2.3 times revenues. The forecast yield is just 1.9%, though, but covered four times.

GoCo is investing £10m in promoting its new regular energy switching service weflip, which also aims to drive repeat revenues, while full-year revenues showed adjusted operating profit up 22.2% to £44m, and adjusted basic earnings per share 20% higher at 7.8p. After a tough time, the price comparison sector could be worth a closer look again.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Moneysupermarket.com. 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.

More on Investing Articles

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

The National Grid share price just plunged another 10%. Time to buy?

The National Grid share price is one of the FTSE 100's most stable, and nothing much happens to it? Well,…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

Up 15% in 3 months, but I still won’t touch Vodafone shares with a bargepole

Harvey Jones has been shunning Vodafone shares for years. The FTSE 100 stock is finally showing signs of life, but…

Read more »

Growth Shares

This UK stock could be like buying Nvidia in 2021

Jon Smith thinks he's missed the boat with Nvidia shares, but flags up a UK stock that has some very…

Read more »

Businesswoman calculating finances in an office
Investing Articles

The FTSE 100’s Intertek delivers a bullish update — can the share price soar?

I’d describe Intertek as a quality business with a decent dividend income, but will the share price shoot the lights…

Read more »

Market Movers

Up another 10% yesterday, how high can the Nvidia share price go?

Jon Smith talks through the latest results but flags up why further gains could be harder to come by for…

Read more »

Investing For Beginners

Down 43% in a year, I think this value stock is primed for a comeback

Jon Smith flags up why a FTSE 250 share has fallen so much in the recent past, but explains why…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Nvidia stock is stupidly expensive. Or is it?

Nvidia stock's up over 2,000% in the past five years. Christopher Ruane explains why it could be wildly overvalued --…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

The FTSE 100 stock I’ve been buying this week

Stephen Wright thinks the FTSE 100 slipping back this week has offered an opportunity in one of the highest-quality UK…

Read more »