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.
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.
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.
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.
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.