While the general UK market continues to yo-yo between delight and despair with alarming regularity, some stocks have been recovering nicely. Indeed, there’s one I own from the FTSE 250 that I think is just getting started.
Huge gains
Holders of Moneysupermarket.com (LSE: MONY) are likely to have enjoyed how their investment has fared this year.
The share price is up nearly 30% in 2023 so far, thanks to some encouraging updates that suggest trading is finally returning to normal after multiple global setbacks.
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That’s a very satisfying return on its own. However, it doesn’t take into account the dividends paid out along the way (more on this later). So the actual return is even better.
Is it time for me to sell up? I don’t think so.
Why so bullish?
On Thursday morning, Ofgem announced the new energy price cap that will see average annual bills fall to £2,074. That’s £426 less than the current Energy Price Guarantee level. However, this rate is only guaranteed for the three months (from July to September).
Now, as energy prices fall, we can expect more providers to eventually re-introduce deals to try and snag customers. And we can be pretty sure that savvy savers will be heading over to sites like Moneysupermarket.com to find out where to get the most bang for their buck.
Put simply, the more people that sign up for deals via the company, the better it is for its top and bottom lines.
Taking this into account, I think we could see more demand for the shares in anticipation of even better trading ahead.
More gains to come?
But nothing is guaranteed. Having done so well in 2023 so far, there’s always a chance that everything could be priced in and some profit-taking should be expected. The likelihood of the energy market becoming competitive again isn’t exactly a secret, after all.
Even if those gains do materialise, it could be later than expected. Interestingly, the company said in April that it “does not expect a significant energy switching market in 2023“.
This is why I think it’s always best to look at the underlying quality of what I own. In other words, is Moneysupermarket a fundamentally good company I could remain invested in even if things didn’t transpire as I hope they will?
I believe it is.
Quality FTSE 250 stock
Based on various financial metrics, this is a great business. Due to its online-only presence, margins are seriously high. The same can be said for the amount of money Moneysupermarket generates for what it puts into the business to help it grow.
This makes the price-to-earnings (P/E) ratio of 17 look like good value, in my book. True, it’s not screamingly cheap. The company isn’t devoid of rivals either. However, I suspect — for the reasons mentioned above — this isn’t ever going to find its way into the bargain bin.
Oh, and even if I’m wrong about more gains, there’s always the income stream to compensate me. Moneysupermarket shares look set to yield 4.7% in the current financial year.
A company with solid fundamentals combined with solid prospects for eventual growth and delivering a solid income in the meantime… what’s not to like?
I’m tempted to buy more when cash becomes available.
