12 Stocks of Christmas: MONY

MONY (LON:MONY) - Comparing the comparers, this looks like a good deal

• Market cap at the time of writing: £1.1bn, at a share price of 190p.

This is another stock that was a strong contender for my 2025 watchlist. Ultimately I decided that my fresh picks should be companies with smaller market caps, as my goal is really to provide a “small-cap watchlist” rather than a more general watchlist.

Even so, the temptation to include Moneysupermarket was strong.

I am a former shareholder of Gocompare (GOCO) which in the end got taken out by Future plc (FUTR) for nearly £600m in 2020.

For context, Gocompare’s results in FY December 2019 showed revenues of £152m and adjusted operating profit of £26.5m, although that was sharply lower than the prior year due to investment in automatic switching software.

A more representative figure for operating profit might therefore be 2018’s £44m. Applying the then-tax rate of about 20% to that, I get a P/E multiple paid by Future of c. 17x, and Future also took on Gocompare’s net debt (over £70m). Future may have overpaid but it shows what sort of valuation was achievable in a bull market.

Fast forward to the current year and another MONY rival is potentially going to see some deal-making. Media reports in October suggested that a major Canadian pension fund was exploring the potential sale of its stake in the sector leader, Comparethemarket (CtM). The CPPIB owns 30% of CtM and was reportedly thinking about offloading it.

Again this is just media speculation, but the valuation that CPPIB would put on CtM was said to be “up to 15 times its earnings”, suggesting a value of £4.5 billion for CtM as a whole.

No further media reports have been seen since then, so perhaps no buyer turned up who was willing to pay that sort of valuation for it, but equally we can say that the CPPIB was not willing to sell at a price far below that valuation.

All of which brings us to MONY.

With its rivals being valued at up to 15-18x earnings, where is MONY trading? At 10.5x earnings:

Those are forward earnings, so perhaps you might argue that a trailing multiple is a fairer comparison? It turns out that you get a similar answer of about 11x if you use the FY Dec 2024 net income forecast of £91.9m.

Net debt is immaterial (last seen at £25m as of June 2024) so I do not include it in the calculation.

As I noted when I covered this stock in October, MONY is on track to generate a similar result in 2024 as it did in 2019. But the valuation then was £2 billion, while the valuation now is only £1 billion. Its quality metrics have deteriorated over time, but they do remain above-average:

Clearly the market is less excited about MONY’s growth prospects now than it was five years ago. Given that revenues have increased over this timeframe but profits haven’t, that is understandable.

But to my value-investor eyes, this is still a 50% discount for a company with a strong position in a market where there are only a few competitors. Comparethemarket might be the big dog with over 50% market share, but MONY is the best of the rest. So I’ve compared the market and I think that MONY is very interesting at the current level.