This FTSE 250 high flier is down 10% today! Here’s what I’d do right now

Harvey Jones says this crashing FTSE 250 (INDEXFTSE:UKX) stock may still be expensive despite today’s share price fall.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Price comparison sites have been a big deal for the last decade as tens of millions log on to compare financial products online. Investors have reaped the rewards too, with the Moneysupermarket.com (LSE: MONY) share price up 108% over the past five years. Its outperformance has continued this year, with the stock up 32% compared to 12 months ago.

Moneysupermarket

It has gone into sharp reverse today with the share price crashing 10% after a disappointing, but hardly disastrous, Q3 trading statement. The site’s current motto is Get Money Calm, but today investors are in a selling frenzy. This could be an opportunity for those who believe in the group’s longer-term prospects. 

Today’s update was bullishly headlined “Revenue grows 4% as energy outperforms”, but investors chose to focus on less impressive numbers, primarily the 5% drop in revenues from its Money division to £20.6m.

Should you invest £1,000 in Centamin right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Centamin made the list?

See the 6 stocks

Quarterly revenues from Home Services (which includes energy) compensated by growing a healthy 21% to £17.7m, but this slowed from 40% growth when measured over the nine months to 30 September.

Revenue growth in its Insurance division, which accounts for half of all sales, remained solid at 3% to £49.9m, despite the “subdued premium environment”. CEO Mark Lewis warned that although overall trading dynamics should continue to the end of the year, Money will “weaken”. However, the board remains confident of meeting full-year market expectations.

There were signs of a slowdown in July, when I warned the group has to keep growing fast to justify its toppy valuation of 22 times forecast earnings. Today it still looks pricey at 21.4 times forward earnings, with a price-to-revenue ratio of 5.3. City analysts remain optimistic, suggesting earnings will rise 4% this year and 9% next, when the dividend will hit 3.3%.

Moneysupermarket has a strong brand and mobile functionality, and the over-crowded market has been whittled down to just four major competitors: Compare the Market, Confused.com, GoCompare and uSwitch. The stock may still tempt, but given today’s pricey valuation you might want to look elsewhere in the FTSE 250.

GoCompare

GoCo Group (LSE: GOCO) has been flying lately, its share price jumping 16% in the last week (30% over the month), despite July’s interims showing year-on-year revenue growth of just 0.3% to £76m.

Its numbers show the difficulty of competing in this market, with price comparison revenues flat and car insurance conversion of just 1.2 percentage points, “broadly offsetting marketing inflation in a competitive market”.

GoCompare has been looking to drive growth – or at least maintain its market position – with new services such as WeFlip, and the recent acquisition of the Look After My Bills service, which has more than 150,000 live customers, for £12.5m.

The group is keen to stress its “disciplined financial performance”, essential in such a competitive market, and is looking to add a new revenue stream by developing proprietary technology platform SaveStack, striking a recent partnership with CYBG/Virgin Money.

Again, GoCompare looks pricey 21.1 times forward earnings, given low growth prospects and a forecast yield of just 1.4%. Investors have been piling in lately, but this remains a tough sector to make money in.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Investing Articles

3 high-yield dividend shares to consider buying for a retirement portfolio

Dividend shares can provide retirees with regular passive income in their golden years. Our writer picks out three with yields…

Read more »

Investing Articles

Tesla stock has halved. Could it now double – or halve again?

After a wild few months for Tesla stock, Christopher Ruane weighs some pros and cons of the investment case. Could…

Read more »

Investing Articles

Does it make sense to start buying shares as the stock market wobbles?

Does a rocky stock market make for a good or bad time to start buying shares? This writer reckons it…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£15k of passive income a year? It’s possible with the right dividend strategy!

To figure out how much dividends are needed for a lucrative passive income stream, investors must understand which strategies get…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

As US markets wobble, I’m listening to Warren Buffett!

The long career of billionaire investor Warren Buffett has included plenty of market turbulence. Here's what our writer's learnt from…

Read more »

UK money in a Jar on a background
Investing Articles

5 shares yielding over 5% to consider for a SIPP

Christopher Ruane introduces a handful of FTSE 100 and FTSE 250 shares he thinks an income-focussed SIPP investor should consider.

Read more »

Investing Articles

Here’s how an investor could invest a £20k ISA to target £1,500 of passive income per year

Can a £20,000 ISA throw off close to £30 per week on average of passive income when invested in blue-chip…

Read more »

Investing Articles

As gold hits $3,000, this FTSE 100 stock is primed for blast off

As Western institutions scramble to get as much gold as they can lay their hands on, Andrew Mackie believes this…

Read more »