REA share price in focus
Founded in 1995, REA Group is a Melbourne-based real estate advertising company that is majority-owned by News Corp. In Australia, it’s best known for its Realestate.com.au platform.
REA Group 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. While the business has diversified globally, Australian operations still account for 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.
The competitive advantge that REA has is the same as any other established platform: network effects and economies of scale. In other words, Domain (the #2 player) is meaningfully behind REA in users and views, which means REA can continue to control pricing and market dynamics. REA also benefits from owning assets across all parts of real estate, including listing, advertising, mortgage broking, and house sharing.
XRO shares
Xero was founded in 2006 in Wellington, New Zealand, by Rod Drury, who led the company until 2018. Employing more than 3,000 people, Xero helps millions of subscribers manage their accounting and tax obligations across the globe.
The cloud-based “beautiful accounting software” developed by Xero is primarily for accountants and bookkeepers to better service their small business customers.
Through Xero, small business owners and their advisors/accountants have access to real-time financial data and on any device. Xero provides its core cloud accounting software to customers in New Zealand, Australia, the UK and, to a lesser extent, the USA.
REA share price valuation
As a growth company, one way to put a rough calculation on the REA share price could be to compare its price-to-sales multiple over time. Currently, Rea Group Ltd shares have a price-sales ratio of 16.75x, compared to its 5-year average of 17.41x, meaning its shares are trading below their historical average. This could mean that the share price has fallen, or sales have increased, or both. In the case of REA, revenue has been growing over the last 3 years. Please keep in mind that context is important – and this is just one valuation technique. Investment decisions can’t just be based on one metric.
The XRO share price currently trades at a price-sales ratio of 14.18x, which compares to its 5-year long-term average of 18.65x. So, XRO shares are trading below their historical average. However, a simple multiple like this should only be the start of your research. The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! Just remember there are many different ways to value a share, like Xero Ltd.
