I am looking to add UK shares to my holdings that offer returns as well as growth prospects. Could MoneySupermarket (LSE:MONY) fit the bill here? Let’s take a closer look at whether I should buy or avoid the shares.
Comparison services
As a quick reminder, Moneysupermarket.com is a leading comparison website for consumers to compare the best insurance products as well as other services too. Consumers are able to fill in their details and select the best offer for them and switch products too. I’ve used it in the past when looking for car, home, and travel insurance.
So what’s happening with Moneysupermarket shares currently? Well, as I write, they’re trading for 190p. At this time last year, the stock was trading for 240p, which is a 20% decline over a 12-month period. Many stocks have fallen in recent months due to macroeconomic headwinds as well as the tragic events in Ukraine.
The bull and bear case
Let’s take a look at some of the bull and bear aspects of Moneysupermarket shares. I’ll start with some positives.
Firstly, I’m buoyed by Moneysupermarket’s presence, profile, as well as brand power. Last year it helped consumers save approximately £1.6bn. In addition to this, it continues to grow its business with strategic acquisitions of smaller sites and amalgamates these into its offering to grow the business. A prime example of this is its purchase of leading cashback site Quidco.
Next, I believe that Moneysupermarket is in a prime position to benefit from the current economic outlook. The cost-of-living crisis, created by soaring inflation, should lead to consumers looking for cheaper deals on essential household bills. In turn, this could boost its performance and returns.
Furthermore, I like the look of Moneysupermarket’s performance track record. I am aware that past performance is not a guarantee of the future. However, looking back, I can see its recent update for the six months ending 30 June 2022 was impressive. It reported earnings rose by 10% and it saw increased demand for insurance products especially.
Finally, Moneysupermarket shares would boost my passive income stream through dividends. The current dividend yield on offer stands at over 6%. This is higher than the FTSE 250 average of 1.9%. I am conscious that dividends are never guaranteed, however.
So to the bear case. I notice that due to the recent events around energy prices, the energy comparison market is closed. This could impact demand for Moneysupermarket’s services and have an effect on performance and returns. This service is expected to be closed for the remainder of the year at least.
Finally, some comparison sites have come under pressure in recent years after the Competitions and Markets Authority shone a light at what it deemed some questionable practices. Some firms were even fined. This can have an adverse effect on a balance sheet, as well as investor sentiment and damage to a brand.
My verdict
To summarise, for me the positives outweigh the negatives when it comes to Moneysupermarket shares. I would be willing to add the shares to my holdings. The passive income opportunity, its position in the comparison marketplace, as well as performance track record, help build my investment case.