Search Share Prices
Moneysupermarket slumps as Barclays says valuation not justified
Moneysupermarket was under the cosh on Tuesday as Barclays said a re-rating from here can only be justified if earnings per share growth returns to double-digit territory.
The bank, which kept its 'equalweight' rating on the stock but trimmed the target price to 310p from 315p, pointed out that at 19x 2018 price-to-earnings, the shares are back to where they were before the new chief executive announced more investment in early March.
Barclays said the stock's current valuation "would suggest that investors have given them the benefit of the doubt in terms of growth improving in 2019 after a year of investment in 2018".
"To make 19x look cheap, we believe that more than 7% expected earnings growth in 2019 is needed. We don't see valuation as a reason to own this share outright until we get more confidence that a return to double-digit EPS growth is possible."
Barclays added that while a return to double-digit EPS growth is possible, this will be tough to achieve next year. As a result, the valuation is not particularly interesting value given that investors can buy Auto Trader on 21x, with the prospect of clear double-digit EPS growth even with cyclical headwinds.
"In our view, it is unlikely that numbers will move much through 2018 (we expect Q2 to be subdued with 5% revenue growth) and we expect the stock to be range-bound. If it creeps up to a low 20s P/E that looks clearly too expensive.
"Equally on mid-teens we would have sympathy with those buying on valuation alone. Near-term, we expect the stock to stay range-bound and could underperform peers."
Barclays highlighted a preference for overweight-rated Delivery Hero, as well as Auto Trader.
At 1305 BST, the shares were down 5.7% to 304.80p.