The Woolworths Group Ltd (ASX:WOW) share price is lower 10.3% since the start of the 2024. The Rea Group Ltd (ASX:REA) share price is 8% off its 52-week low.
WOW share price in focus
Founded in 1924, Woolworths is a retail operator in Australia and New Zealand with over 3,000 stores and over 100,000 employees. It is currently the Australia’s largest company in terms of revenue and market share.
Woolworths’ main operations include supermarkets (under the Woolworths brand in Australia and Countdown in New Zealand), retailing through its discount department stores under the Big W brand, and business-to-business (B2B) brands like PFD. Overwhelmingly, it’s 35%+ share of Australian supermarkets is its crown jewel.
Woolworths is a very popular choice for many ASX investors seeking dividend income. It consistently pays a fully franked dividend, usually at a yield of over 3%, and offers a very defensive earnings stream. It’s competitive advantage is probably best summarised as scale (distribution, low costs, etc.) and proximity (most shoppers still shop based on distance to the supermarket).
REA shares
Started in 1995, REA Group is a Melbourne-based real estate advertising company that is majority owned by News Corp. In Australia, it operates through its Realestate.com.au platform.
REA operates on a global scale and now operates property websites in around 10 countries used by some 20,000 agents. In a typical month, the core Australian website gets over 55 million visits. The business is broken down across geographic lines, with Australia taking the lion’s share of revenue. Within Australia, REA makes money by listing properties for sale or rent (i.e. the agent uses REA’s website to show properties, which the property owner is on the hook to pay). It also makes money from financial services (e.g. mortgage broking), but this is a much smaller part of the business.
Property websites such as Realestate.com.au attract both buyers and sellers and aim to simplify the process resulting in an efficient and stress-free transaction. We believe its competitive advantge is that of any other established platform: network effects and efficient scale. In other words, Domain (the #2 player) is meaningfully behind REA in users and views, which means REA can continue to charge more.
REA share price in focus
One way to have a ‘quick read’ of where the WOW share price is, is to study something like dividend yield thru time. Remember, the dividend yield is effectively the ‘cash flow’ to a share holder, but it can be influenced by yearly or bi-yearly fluctuations. Currently, Woolworths Group Ltd shares have a dividend yield of around 3.09%, which compares to its 5-year average of 2.66%. Put simply, WOW shares are trading below their historical average dividend yield.
The REA share price trades at a price-sales ratio of 18.10x, which compares to its 5-year long-term average of 12.29x. So, its shares are trading higher than their historical average. However, please do more investigating than a simple multiple like this. Our websites explain Discounted Cash Flow (DCF), Dividend Discount Models (DDM), and many different ways to value a share, like Rea Group Ltd.
