Whatever 2020 brings, people will still need to heat their homes, insure their cars, and hold money in savings accounts. They will want the best deal possible for such services, which should mean price and benefit comparison websites will get a lot of visits.
Moneysupermarket.Com Group (LSE: MONY) operates comparison websites for prices of holidays, energy, and insurance, among other things. I think shares in it could do well in 2020 and beyond.
Moneysupermarket has grown its revenues in each of the last five full years, from £248m in 2014 to £356m in 2018. Revenue for the latest half-year (up to June 2019) was 5% higher than the one before. Expectations are that full-year 2019 sales figures, due sometime in February, will better the 2018 ones.
Operating profits have grown faster than revenues from 2014 to 2018 because expenses have been growing slower than revenues. The operating profit margin of 30% for 2018, up from 26% in 2014, demonstrates the efficiency of the company’s cost structure.
Moneysupermarket has less than 50p of debt for every £1 of equity. Low leverage is good because it means things would have to get very tough before the company struggled to make its interest payments.
Paying relatively little interest, but deducting some for tax purposes, means the bulk of operating profits get reported as earnings. Shareholders got a healthy 43% return on their equity in the company for 2018.
Earnings per share have grown by 13.8% per year on average from 2014 to 2018. Strong growth here means that after necessary reinvestment, there is cash to be returned to shareholders as dividends.
Moneysupermarket grew its dividend by 9.16% each year on average from 7.43p per share in 2014 to 10.55p in 2018. The 2018 dividend was covered 1.53 times by earnings, and almost twice by cash flow from operating activities, meaning dividends are at least reasonably protected.
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Moneysupermarket’s history is impressive, but you buy shares in a company’s future. I believe that this company can continue to deliver.
It has well-known and well-liked brands. The core MoneySuperMarket brand helps consumers save money on household bills, TravelSupermarket helps them save on holidays, and MoneySavingExpert fights the consumers’ corner in finance.
The recent acquisition of Decision Tech adds consumer home and mobile communication price comparison services to Moneysupermarket’s skill set. Decision Tech has been growing its revenues by about 30% each year and also forms part of a push into business-to-business comparison services.
Mortgage comparisons for consumers are on their way, and credit scoring has been introduced for MoneySuperMarket users. Marketing and advertising spending increased over the first half of 2019, as part of a rebranding and awareness push, which should lift revenues down the line.
Shares in Moneysupermarket cost around 330p right now. The trailing 12-month dividend yield and price-to-earnings ratio are 3.4% and 19, respectively. The FTSE 250 index, of which Moneysupermarket is a member, yields a little under 3% and has a price-to-earnings ratio of 22.
Shares in Moneysupermarket are both cheaper and yield more than the index right now. If dividends continue to increase, that yield will grow. I think the shares are a bit of a bargain and have snapped up a few.
James J. McCombie owns shares in Moneysupermarket.com. 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.