Yahoo Finance The direction of travel is good for this stock and car insurance should enjoy a boom
Complaints from the public that their car insurance has gone up by as much as 75pc have resulted in it getting news coverage and has highlighted an issue that should encourage more people to shop around when their policy is up for renewal, which is music to the ears of Moneysupermarket.
The price comparison site should, in theory, see an uptick in web traffic as people look to avoid having to pay over the odds.
Why are premiums going up? Insurers have had to stomach higher costs to get their customers’ vehicles fixed, plus delays in getting parts which extends the time claimants need a courtesy car.
The number of claims has also gone up this year – 559,000 claims were settled in the first quarter alone, which represents a 14pc increase on the same quarter a year earlier, according to the Association of British Insurers.
Insurance was the second-fastest growing segment in Moneysupermarket’s first-quarter results, with revenue up 23pc year on year to £50.6m thanks to a boom in people switching car policies.
“The biggest growth came from travel – people comparing package holidays and care hire, which reflected the surge in demand for people wanting to go abroad on holiday. That segment saw revenue grow by 63pc to £5.4m in the second quarter.”
Expectations for interest rates to keep going up should spur people to shop around for better deals on credit cards and loans, again helping to drive earnings for Moneysupermarket as it collects commission from the new product provider when someone switches.
Eventually the energy switching market should come back to life and give the price comparison site another tailwind though it does not expect that to take off in earnest until next year.
The market appears optimistic about the company’s prospects, judging by how the share price has risen by 41pc so far this year. The next big test for the shares will be half-year results scheduled for Monday.
For the full year, the analyst consensus forecast is £108m adjusted pre-tax profit (2022: £95.1m), rising to £122m in 2024 and £143m in 2025.
Questor says: buy
Ticker: MONY
Share price at close: 272.2p
Update: AG Barr
Last year Irn-Bru-maker AG Barr credited the good summer weather as one reason behind positive first-half results.
The fact we have just experienced the hottest June on record in the UK bodes well for recent sales as scorching temperatures typically entice people to find liquid refreshment to quench their thirst.
The direction of the share price tells a different story. Down 14pc in six months versus a 6pc decline from the FTSE All-Share index of UK stocks, AG Barr’s performance implies investors are worried about something.
One third of shareholders voted against the directors’ remuneration policy at the annual general meeting in May, suggesting the bosses are paid too much versus what investors think the company is achieving.
At the same time, workers believe their pay is too low which has led to strike action at AG Barr’s Cumbernauld production and distribution centre which threatens to disrupt supplies of Irn-Bru over the summer.
Full-year results published in March came with a warning that investment in the business would dilute operating margins in the short-term. Add in a warning about inflationary cost pressures and it is easy to see why the market has lost interest in the shares.
Investors this year have rewarded companies that announce cost-cutting measures, whereas those who say they will spend more have had a tougher ride on the stock market.
Businesses need to spend money to make money yet the market has a very short-term focus, which means investors are ignoring potential longer-term investment benefits.
A savvy investor might view this situation in a different light, seeing that shares in a business with a good long-term history of generating strong returns, as is the case with AG Barr, is now on sale.
It has a record of double-digital profit margins, double-digit returns on capital and strong cash generation from a portfolio of beloved brands which include Tizer, Rubicon and KA.
A trading update expected early next month should shed light on how the drinks business is coping in the current environment. In Questor’s view, be patient and hold on.
Questor says: hold
Ticker: BAG
Share price at close: 463p
Dan Coatsworth is a stock market analyst at AJ Bell
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