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.
While it may be large, Rea Group Ltd is a growth stock, and so it requires a different set of rules and may not be simple to value at times. Studies have shown that over 5-10+ years, it’s top-line revenue growth which explains a stock’s performance. That’s why it’s good to see Rea Group Ltd is able to grow revenue at 18.6%, a good clip.
CSL shares
CSL is a global biotechnology company that develops and delivers innovative medicines that save lives, protect public health, and help people with life-threatening medical conditions live full lives.
The company is divided into three main business units: CSL Behring, CSL Seqirus and CSL Vifor. Behring, acquired in 2004, manufactures and distributes blood plasma products. Seqirus was formed by a rebranding of BioCSL and the acquired Novartis flu business (bought in 2015), and makes flu-related products and performs pandemic-related services for Governments. Finally, Vifor makes products for iron deficiency and nephrology (renal/kidney care).
CSL has developed a reputation with Australian investors over many decades as being a reliable company and a consistent dividend payer. Many consider an investment in CSL to be an indirect play on the continuing rise in healthcare costs.
REA share price valuation
As a growth company, some of the trends we would be looking for from REA include revenue growth, profit growth, and return on equity (ROE). Since 2021, REA has grown revenue at a rate of 18.6% per year to reach $1,677m in FY24. Over the same time period, net profit has fallen from $323m to $303m. REA last reported a ROE of 18.9%.
Since CSL is more of a ‘mature’ or ‘blue-chip’ business, some of the metrics that might be important to us include the debt/equity ratio, average yield, and return on equity, or ROE. In FY24, CSL Ltd reported a debt/equity ratio of 62.8%, meaning the company has more equity than debt.
As for dividends, since 2019 CSL has achieved an average dividend yield of 1.5% per year.
Finally, in FY24, CSL reported an ROE of 14.6%. For a mature business you generally want to see an ROE of more than 10%, so CSL clears this hurdle.
It’s important to keep in mind that these are only a selection of metrics and don’t give us enough information to value the business or make an investment decision. To learn more about valuation, I’d recommend checking out one of our free online investing courses.
