Moneysupermarket.Com Group (LSE:MONY) shares are falling, but I think it has many elements of a value stock for a long-term portfolio. Along with its links to strong brands, it offers a decent dividend yield and may be considered a cheap UK share. But does it have what it takes to withstand the pandemic?
Share price rise and fall
After rising 59% from a low of £2.19 in the March stock market crash, to a high above £3.50 in June, the Moneysupermarket share price has fallen back over 28%. This is because the pandemic is ravaging its income streams and making trouble for the group.
The key purpose of Moneysupermarket is to entice customers with knockdown offers to get them to switch utility and insurance suppliers to save money. This earns the company a commission. Unfortunately, revenue for the first three quarters of the year is down 11% compared to the year-ago period. The FTSE 250 company blames a fall in the energy price cap and a rise in wholesale energy costs. Both of these created a reduction in potential customer savings, discouraging them from switching supplier. Some 19% fewer households switched energy provider this September than in September 2019. Meanwhile in moneylending, banks brought in stricter credit scoring, which also discouraged customers from shopping around.
The company saw an increase in motor insurance, but demand in other insurance channels, such as banking and travel, is weakening.
This disappointing trading update led analysts to cut their forecasts for the short term. Although some remain bullish on the long-term forecast.
Can this UK share ride out Covid-19
The pandemic is undoubtedly the catalyst, so things should rapidly improve once that’s been dealt with. This means as a prospective long-term investment, I think these next few months could prove a good time to purchase shares in Moneysupermarket. It’s a business trusted by patrons and has proven itself a leader in providing consumers a simple way to make savings when shopping for the best deal. That’s why I see it as a value stock for long-term investment.
It’s previously invested heavily in its technology, improving its digital experience and site functionality. I’d expect this to pay off in the future. The most appealing aspect of this share for a long-term portfolio is its dividend. It hasn’t been cut during the pandemic and is covered at 1.5 times earnings per share (EPS). The dividend yield is around 4.6% today, it has a price-to-earnings ratio of 14 and EPS is 17.7p.
Peter Duffy is the new CEO, and he comes from FTSE 100 group Just Eat. Prior to that he worked at easyJet and Audi UK. So he has considerable experience in working with public companies and driving growth.
So what’s Duffy’s view of the current situation? “Our markets continue to be impacted by Covid-19, which is affecting our current performance,” he said. “However, the group benefits from strong brands and high levels of cash conversion, so we are well positioned to weather this period of economic uncertainty and deliver future growth.“
As I’m building a long-term portfolio with a long-term investment goal, I want to choose shares to buy in companies that are still going to be here in the future. My plan is to buy and hold for at least five to 10 years. So, I need to feel confident in the company before parting with cash. Moneysupermarket is a UK share I’d consider buying.
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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat Takeaway.com N.V. and 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.