Investment View: The boss cashed out, but the price may yet rebound

Moneysupermarket

Our view Buy

Price 185p (+1.1p)

There are two issues hanging over Moneysupermarket, the obscenely successful price-comparison website whose deeply annoying ads are all but impossible to ignore (which is kind of the point).

The first is the fact that in June, co-founder Simon Nixon offloaded roughly 15 per cent of the shares, netting himself £170m, which means he won't need the site. He'll likely have a private banker, or three, running around for him. The second is the recent trading statement, which unnerved investors.

Let's look at the former to begin with. Last month, I advised investors to follow the lead of SuperGroup founder James Holder who netted £20m after dumping 2 million shares in his business, apparently to fund his divorce. It makes all sorts of sense to take a very jaundiced view of businesses where the men at the top are pulling out.

However, Moneysupermarket is different. For a start, Mr Nixon, the university dropout turned financial adviser, has increasingly been taking a back-seat role in the operation.

That's something I view as a positive sign. When entrepreneurs float businesses and retain big stakes, they can sometimes forget that they have partners to deal with who should have the same rights as them and have a right to expect equal treatment.

I'm not saying that's the case with Mr Nixon, but it can happen. It's frequently a positive thing for a businesses when the founder steps back with the aim of enjoying some of the wealth they have generated.

As such, we can't really complain about Mr Nixon cashing in some of his chips. Moreover, his move makes more shares available to the open market for trading (known as improving liquidity) and was accompanied by a juicy special dividend.

Of much more concern would be last week's trading statement, which suggested that all is not well with the money part of Moneysupermarket.

The Government throwing cheap cash at the banks to encourage mortgage lending has come with some nasty side effects. It has crimped savings rates, and that has crimped business for Moneysupermarket because savers now don't want to know.

The site is also suffering from fewer banks putting products on its markets, and intense competition from rivals such as GoCompare, Confused.com and those infernal meerkats.

Google changing its search algorithms favoured them and worked against Moneysupermarket, but now the changes have settled, you can expect to see it working to address its slippage in the search rankings.

Those rivals have also been advertising hard. You're about to see Moneysupermarket's response, but putting back its ad push (and these sites are very ad-dependent) meant sales growth nearly ground to a halt in July.

However, all is not lost. Moneysupermarket's other divisions, travel, insurance and home service, all gained ground.

The company has the financial clout and the wherewithal to step up its game.

While analysts may respond to the statement by tweaking their numbers downwards, falls in the share price, like the 15 per cent tumble last week, are often overdone. As long as the next update contains positive news, it could easily rebound.

As for those banks, competition is gradually coming on stream, with the new banks being spun out of Lloyds and RBS keen to grab new business (and their current "parents" motivated to get back what they've lost).

So Moneysupermarket's travails may be short term, although it would need a significant uptick in consumer confidence (and in consumer incomes) for the site to really fly. Personal loans, credit cards and the like are a big driver.

The shares trade on 17 times this year's forecast earnings, falling to 15 times next year's. Next year's forecast yield (when there won't presumably be a special pay out) should hit 3.7 per cent, which is respectable.

I accept that there are clouds over Moneysupermarket right now. You couldn't quite use the term "profit warning" to describe the trading update, but it was worrying and while it may be an "old wive's tale" it does sometimes seem like trouble in the City comes in threes.

That said, this company could bounce back rapidly, and the shares with it. I'd bet on the latter and make the stock a buy, albeit a risky one.

News
Denny Miller in 1959 remake of Tarzan, the Ape Man
people
Arts and Entertainment
Cheryl despairs during the arena auditions
tvX Factor review: Drama as Cheryl and Simon spar over girl band

News
Piers Morgan tells Scots they might not have to suffer living on the same island as him if they vote ‘No’ to Scottish Independence
news
News
i100Exclusive interview with the British analyst who helped expose Bashar al-Assad's use of Sarin gas
PROMOTED VIDEO
Sport
Angel Di Maria celebrates his first goal for Manchester United against QPR
Football4-0 victory is team's first win under new manager Louis van Gaal
Arts and Entertainment
art
News
newsIn short, yes
Arts and Entertainment
Rob James-Collier, who plays under-butler Thomas Barrow, admitted to suffering sleepless nights over the Series 5 script
tv'Thomas comes right up to the abyss', says the actor
Arts and Entertainment
Calvin Harris claimed the top spot in this week's single charts
music
Sport
BoxingVideo: The incident happened in the very same ring as Tyson-Holyfield II 17 years ago
News
Groundskeeper Willie has backed Scottish independence in a new video
people
Arts and Entertainment
The Doctor poses the question of whether we are every truly alone in 'Listen'
tvReview: Possibly Steven Moffat's most terrifying episode to date
News
ebooksAn unforgettable anthology of contemporary reportage
News
i100
Life and Style
Cara Delevigne at the TopShop Unique show during London Fashion Week
fashion
News
The life-sized tribute to Amy Winehouse was designed by Scott Eaton and was erected at the Stables Market in Camden
peopleBut quite what the singer would have made of her new statue...
Sport
England's Andy Sullivan poses with his trophy and an astronaut after winning a trip to space
sport
News
peopleThe actress has agreed to host the Met Gala Ball - but not until 2015
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Senior BA - Insurance **URGENT**

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Training Coordinator / Resource Planner - City, London

£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...

Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

Day In a Page

These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week
The fall of Rome? Cash-strapped Italy accused of selling its soul to the highest bidder

The fall of Rome?

Italy's fears that corporate-sponsored restoration projects will lead to the Disneyfication of its cultural heritage
Glasgow girl made good

Glasgow girl made good

Kelly Macdonald was a waitress when she made Trainspotting. Now she’s taking Manhattan
Sequins ahoy as Strictly Come Dancing takes to the floor once more

Sequins ahoy as Strictly takes to the floor once more

Judy Murray, Frankie Bridge and co paired with dance partners
Wearable trainers and other sporty looks

Wearable trainers and other sporty looks

Alexander Wang pumps it up at New York Fashion Week
The landscape of my imagination

The landscape of my imagination

Author Kate Mosse on the place that taught her to tell stories