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Why the iSelect Ltd (ASX:ISU) share price crashed 15% lower today

The iSelect Ltd (ASX: ISU) share price has once again been among the worst performers on the local market today.

The price comparison company’s shares fell as much as 15% in early trade following the release of its full-year results.

At the time of writing its share price has recovered a good portion of this decline and is lower by almost 7% at 76.5 cents.

What happened in FY 2018?

I think it is fair to say that FY 2018 will be a year to forget for the company and its shareholders.

Weakness across almost all its business units meant underlying earnings before interest and tax (EBIT) was expected in the range of $8 million to $12 million in FY 2018, compared to prior guidance of $26 million to $29 million.

Management duly delivered on its revised guidance with underlying EBIT coming in at the low end of its guidance at $8.5 million. This was a decline of over 62% year-on-year and came despite revenue falling just 2% year-on-year to $181.4 million.

On a statutory basis the company posted a net loss after tax of $13.5 million compared to a profit of $16.4 million a year earlier. This was due to the impact of marketing and operational challenges and a $16.9 million one-off non-cash impairment of non-core asset Infochoice.

What about FY 2019?

With a weak result already expected today, all eyes were on iSelect’s outlook for FY 2019.

While the company has stopped short of providing any real guidance, it has revealed that FY 2019 has started positively with a strong financial performance being seen across the company in July.

Management stated that: “An optimal lead profile and strong conversion underpinned a profitable month.”

As a result of this and initiatives implemented over the fourth quarter which are delivering tangible benefits, management appears confident that iSelect is positioned for a return to growth this year.

Should you invest?

Whilst it is pleasing to see iSelect on the road to recovery, I wouldn’t be a buyer of its shares just yet. Instead, I would suggest investors wait to see if this recovery lasts and what impact it has on its profits.

Until then I would focus on other consumer discretionary shares such as high flying Aristocrat Leisure Limited (ASX: ALL) or beaten down Domino’s Pizza Enterprises Ltd (ASX: DMP).

Alternatively, these top shares that experts rate as buys could be even better options.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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