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Questor: This price comparison site can profit from soaring car insurance costs

Car insurance
Car insurance

A healthy paper gain on price comparison site Moneysupermarket.com has frustratingly dribbled away but last week’s first-quarter trading update showed the inherent strengths of a company whose shares offer an attractive yield and trade on an appealing valuation.

Group-wide sales rose by 8pc year-on-year in the first three months of the year as the FTSE 250 index member helped consumers shop around and save money on their bills.

Insurance drove the growth and the performance was all the more creditable, given the dormant nature of the energy switching market, thanks to the ongoing price cap regime.

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Insurance now represents more than half of group sales as car drivers in particular seek help in finding the best deals at a time when inflation in premiums remains a concern for many, while home services (such as energy and broadband) now provide less than 10pc of sales.

Additions to its offering, including the MoneySavingExpert app, QuidCo cashback service and membership schemes like SuperSaveClub, should also help the company to leverage its powerful brand, reduce marketing costs and ultimately drive profits and cash flow.

SuperSaveClub already has more than 300,000 members across ten services.

Any recovery in the energy market would therefore really be a helpful bonus for, rather than essential to, the investment case for the shares, which yield 5.9pc, based on consensus analysts’ forecasts, a figure which means investors are being paid nicely for their patient support.

Questor says: The Chester-based company could still show us the money (buy)

Ticker: MONY

Share price at close: 213.6p

Update: Dr. Martens

One of fund management legend Sir John Templeton’s many notable aphorisms is, “Focus on value, because most investors focus on outlooks and trends.”

This column tries to adhere to this philosophy, but in the case in Dr. Martens (DOCS) we should have heeded our ingrained prejudice against companies that come out of private equity, as the British bootmaker’s latest – and thumping – profit warning leaves us sitting on a nasty book loss.

After four profit warnings in 2023, at least we knew what we were letting ourselves in for.

The shares are down by a quarter since our study, but the profit downgrade for 2024 implied by the latest litany of woes – ongoing weakness in the US wholesale market, more warehousing costs to store excess inventory and input cost inflation – is some 60pc to 70pc.

All we can say (apart from sorry) is, therefore, that it could have been worse, at least from a portfolio perspective.

There is still a great brand here and new boss, former Apple executive Ije Nwokorie, will also take over a company where some £900m in annual sales compare to a stock market valuation of just £675m (albeit with £482m in debt and leases on top of that, at the last count).

That total price tag – or enterprise value – of £1.2bn might still catch the eye of a predator, too, although holding out for a bid is usually a strategy that only leads to disappointment and we have to accept that the stock is likely to be dead money for a while, with 2024 already a bit of a write-off.

Questor says: We can give Dr. Martens one (last) chance (hold)

Ticker: DOCS

Share price at close: 72.10p

Update: Springfield Properties

Scottish housebuilder Springfield Properties is another portfolio position that lies in the red but at least the shares are looking a little more sprightly.

Granted, the ongoing delay in the first interest rate cut from the Bank of England, owing to sticky inflation, is not helping but the Elgin-headquartered company comes with a big land bank, a strong competitive position in its target market and a lowly valuation, so we shall remain patient.

February’s first-half results (20 Feb) had little to commend them at first sight, as completions, revenues and profits all fell sharply year-on-year, debt rose, and the company declared no dividend.

But management did flag an improvement in reservations and a cooling in input cost inflation, trends which could both help the company to maximise the value of its land bank, which currently equates to 6,421 plots (against the 1,301 completions in the year to May 2023).

Springfield is also selling land to reduce its £93m net debt and lower debt can mean lower risk and lower risk can mean a higher share price, all other things being equal.

As a final point, the company’s £110m market valuation compares to net assets on the balance sheet of £151m, so the shares trade at barely 70pc of book value.

Questor says: Stay patient with Springfield Properties (hold)

Ticker: SPR

Share price at close: 94p


Read the latest Questor column on telegraph.co.uk every Sunday, Tuesday, Wednesday, Thursday and Friday from 6am.

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