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This FTSE 250 stock still looks a bargain to me!

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One English pound placed on a graph to represent an economic down turn
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The time to buy quality stocks is when they’re temporarily out of favour. I continue to think there’s no shortage of examples out there in the UK market. As luck would have it, one from the FTSE 250 (in which I’ve already started building a stake) reported to investors earlier today.

FTSE 250 laggard

Price comparison site owner (LSE: MONY) has stubbornly refused to get involved in the recovery in the UK stock market until today. Bar one or two flushes of positive momentum, its share price has been drifting lower for some time now. Today’s interim results provide some context for this. 

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Revenue sank 11% to a little over £162m in the first half of 2021. Pre-tax profit fared even worse, tumbling 31% to £28m. I pretty much expected this. Like many in the market, Moneysupermarket continues to be impacted by the pandemic and the ongoing impact on consumer behaviour.

However, I think there are reasons to be optimistic. Moneysupermarket is still clearly generating a healthy amount of cash. Margins were up, as was the amount of net cash held by the company on its balance sheet.

Holding the interim dividend at 3.1p per share was another encouraging move. Sure, I’d prefer payouts to be increasing. Even so, the fact that it wasn’t reduced is indicative of confidence on the part of management.

Patience required

Naturally, the recovery won’t happen overnight. The spike in Covid-19 infections, while expected, means the rest of 2021 could still be tricky for the FTSE 250 member. The markets in which MONY operates — insurance, money (that is, cards and loans), home services (like energy), and travel — are also “recovering at different rates“, according to the company.

Even so, CEO Peter Duffy did say that he expected “more normal trading conditions” for the company’s markets next year. This may explain why the shares are up strongly today. I personally think we’ll see a dramatic improvement in revenue at MONY’s travel insurance arm as restrictions lift overseas. 

At 19 times earnings before markets opened, MONY still looks like a bargain to me. I’d feel comfortable buying more today. 

Another bargain?

Another company that’s seen buying pressure this morning has been online pension provider PensionBee (LSE: PBEE). Like Moneysupermarket, this new-stock-on-the-block also released half-year numbers to the market today. 

Helped by increased marketing, PensionBee has been attracting more people to its services. Invested customers rose 81% to 92,000 over the reporting period. Perhaps we shouldn’t be surprised by this. Make of it what you will, but PBEE was named as a ‘Best Buy’ in five categories at this year’s Boring Money Awards.

Most importantly, it seems to be hanging on to its customers. Retention rates remained at more than 95%. At £2bn, assets under administration (AUA) were also more than double that seen at this point in 2020. 

Based on today’s numbers and the potential demand for online pension consolidation going forward, I wonder if the shares may turn out to be another bargain in time. Right now, however, I think it’s wise to keep my feet on the ground. PBEE remains loss-making (and won’t be profitable until the end of 2023, according to the company). That’s a long time to keep my money tied up in an illiquid stock. 

Despite today’s encouraging share price rise, I’ll only be adding this promising small-cap to my watchlist for now.

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Paul Summers owns shares in The Motley Fool UK has recommended 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.

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