Key points
- Revenue and profits are still increasing compared with pre-pandemic results
- A higher forward P/E ratio may suggest the firm is overvalued
- Full-year revenue guidance is expected to be at the higher end of £270m to £285m
Having hit a high of 493p in June 2021, the Moonpig Group (LSE: MOON) share price is currently trading at a 52-week low of around 250p. As a card and gifts service operating in the UK and the Netherlands, this company only publicly listed in February 2021. It has performed well during the pandemic, but the FTSE 250 firm’s share price has fallen as pandemic restrictions have eased. Should I be looking to this business for a long-term investment? Let’s take a closer look.
A FTSE 250 stock underpinned by strong results?
In results issued for the six months to 31 December 2021, Moonpig’s revenue was £142.6m. This had more than doubled when compared with the same period in 2019, demonstrating the company’s strong performance during the pandemic. A year-on-year comparison, however, shows that revenue declined by 8.5%. The profit figures display a similar trend. A two-year comparisons shows a rise from £9.4m to £18.7m. Year-on-year, however, profit plunged from £33m.
How do I account for this? It seems that the firm benefited from a massive increase in online shopping during the height of the pandemic. This would explain the high numbers for the 2020 figures. Although revenue and profits fell in 2021, this may simply be the company returning to a more ‘normal’ performance rather than repeating the meteoric rise of a year earlier.
But I feel the company is in a strong position going forward. Moonpig’s ‘reminders database’, a metric by which we gauge its customer base, had grown to over 50m by the end of April 2021. Furthermore, the firm increased its revenue guidance for full-year results to the higher end of £270m-£285m. With a trading update due on 5 April, I will be watching very closely indeed.
Are the shares cheap?
A metric used to judge if a share price is over- or undervalued is the company’s price-to-earnings (P/E) ratio. Moonpig’s forward P/E, that uses estimated net earnings over the next year, stands at 23.7. On its own, this tells us very little. Compared to a major competitor, however, it may indicate that the shares are expensive.
Card Factory, another big player in the cards and gifts space, has a forward P/E ratio of 10.83. This may suggest Moonpig shares remain overvalued, despite falling to a 52-week low.
On the other hand, investment bank Berenberg gave the firm a ‘buy’ rating in January and issued a target price of 430p. What’s more, independent non-executive director Niall Wass increased his own holding by 76% at the end of last month. This was at a price of 304p.
Moonpig, as a business, has performed well recently. But I won’t buy any of its shares at the moment. I want to wait for the next set of results to ensure the company is still going in the right direction. I won’t rule out a purchase in the future though.
