Insurance comparison site beats market expectations
Thursday 12 Jan 2017 Author: Daniel Coatsworth

GoCompare (GOCO) 73.5p

Gain to date: 18.5%

Original entry point: Buy at 62p, 24 November 2016

The financial products comparison website has started to catch the market’s attention with news that 2016 earnings before interest and tax are slightly better than market expectations.

It also reports strong cash generation which is helping to reduce leverage – net debt dividend by earnings before interest, tax, depreciation and amortisation (EBITDA).

GOCOMPARE COM - Comparison Line Chart (Rebased to first)

The business took on £75m of debt to cover the costs of demerging from Esure (ESUR) in November 2016 and a departing dividend, thereby pushing up leverage to 2.8 times. It now says leverage has been reduced to less than 2.0 times at the year end.

We originally said to take advantage of share price weakness following its demerger from insurer Esure in November 2016 and that trade is now paying off. We note chief executive Matthew Crummack seems very confident in the latest trading update, saying he expects to deliver ‘another year of strong growth’.

Full year results on 2 March should help to further educate the market about GoCompare’s capabilities and strengths. Keep buying. (DC)

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