There is nothing like a profit warning to send investors fleeing, and this morning Moneysupermarket.Com Group(LSE: MONY) delivered one. Its stock is down more than 10% in early trading after the flashing red light in today's interim results for the six months to 30 June 2017. Is this a buying opportunity or a threat?
Chief executive Mark Lewis blandly said: "With current trends in our Energy trading, we expect the full-year outlook for adjusted operating profit to be at the lower end of the consensus range." The market response was far from bland, as the news overshadowed a steady 3% rise in adjusted operating profit for the period to £55.2m.
Other financial highlights included a 5% rise in group revenues to £165.3m, a 6% rise in profit after tax to £40.3m, and a 4% rise in adjusted earnings per share (EPS) to 8.1p. Net cash rose 65% to £17.7m, while the interim dividend was increased 3% to 2.84p. Today it yields 3.07%.
Compare and contrast
Lewis was keen to accentuate the positive, pointing out that the group helped more people take control of their household bills than ever before, saving customers £1.1bn, while insurance switching grew an encouraging 18%. However, there was deflating news here too, with Lewis admitting that "the lack of blockbuster energy deals from providers meant we didn't collectively switch as many people as last year".
The analyst consensus suggests that Moneysupermarket's adjusted operating profits should range from £112.6m to £117.4m in 2017. We now know they will be at the lower end of that scale, which is a concern, given that the company is priced for growth at a meaty 22.89 times earnings. It may help crystallise fears that the comparison site sector will struggle to build on its early triumphs.
Money, money, MONY
The sector as a whole needs to keep existing customers switching, and tempt newbies to seek cheaper household services The consumer squeeze should give them added incentive, alongside double-digit price hikes in motor insurance, and utility bill concerns. Sites face the added challenge of differentiating their services from each other. Moneysupermarket has built a strong position, but this is a highly competitive market. The stock is up 25% over one year and 170% over five. Profits are still forecast to hit £123.99 in 2018, although after today's news, bruised analysts may now revise that estimate downwards.
Heat treatment and specialist thermal processing company Bodycote(LSE: BOY) is another growth flyer, up 37% in the last year, and 165% over five years. As a result it also trades at a hefty valuation, of 22.12 times earnings, but with no profit warnings to worry about.
The group, which operates in the automotive and general industry, and aerospace, defence and energy sectors, recently posted 18% revenue growth for the four months to 30 April of £227m, up 7.1% at constant exchange rates. Net cash jumped from £1.1m to £10.6m, thanks to strong cash flow, cost control and managed working capital flows.
Today its launches its new 'Powdermet' technology product, which combines with 3D printing to cut manufacturing time and production costs when making parts. EPS are forecast to rise 12% this year and 7% in 2018, while the yield is forecast to climb to 2.2%. The FTSE 250 company may prove a tempting alternative for disappointed Moneysupermarket investors. Let's hear it for the BOY.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Bodycote 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