Equity Development began coverage of Moonpig Group (LON: MOON) with a fair value of 330 pence a share in a note Thursday, arguing the online card and gifting retailer is undervalued given its growth and returns.
Analyst Caroline Gulliver described Moonpig’s business model as asset-light, growth-compounding and highly profitable, with a sector-leading return on capital employed of about 70%.
“Moonpig’s business model is asset-light, growth-compounding, and highly profitable,” Gulliver wrote. “Not only is it winning the hearts, minds and share of wallet of customers, but is also delivering a sector-leading c.70% ROCE.”
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The firm noted that Moonpig’s data-led, card-first approach has built 12.3 million active customers and a 4.3 out of 5 Trustpilot rating. Some 90% of revenue comes from existing customers, and 40% of orders follow one of 113 million occasion reminder prompts.
That model, alongside expansion into gifting with minimal marketing costs, supports adjusted EBITDA margins of about 27% and an adjusted pretax margin of about 20%. Around 17% of revenue converts into free cash flow.
Equity Development estimates Moonpig is now generating more than £70 million of surplus cash a year to return to shareholders through a progressive dividend and buybacks, after cutting net debt to a comfortable 1.0 times EBITDA.
Under new CEO Catherine Faiers, the firm forecasts earnings per share growth of 12.5% a year from fiscal 2026 to 2029, driven by 6% revenue growth and buybacks.
Despite that, Gulliver stated that the stock trades at 13.5 times 2027 earnings, a roughly 10% discount to its 2022 to 2025 average of 15 times. The 330 pence fair value equates to about 16 times earnings.
