REA share price in focus
Founded in 1995, REA Group is a Melbourne-based real estate advertising company, with News Corp as its majority shareholder. It is best known in Australia for its flagship platform, Realestate.com.au.
REA Group operates globally, managing property websites across 10 countries, serving around 20,000 agents. In Australia, its core website attracts over 55 million visits per month, and the Australian operations still contribute the majority of the company’s revenue. REA generates income primarily by charging property owners for listings, facilitated through agents who use the platform to showcase properties for sale or rent. The company also earns revenue through financial services, such as mortgage broking, though this remains a smaller portion of the business.
REA’s competitive edge lies in its strong network effects and economies of scale. With significantly more users and views than its closest competitor, Domain, REA is well-positioned to dictate pricing and market dynamics. Additionally, REA benefits from its diversified presence across the real estate ecosystem, including property listings, advertising, mortgage broking, and house-sharing services.
The key metrics
For investors, REA’s revenue, gross margin, and profit can provide value insights into the company’s performance.
REA last reported an annual revenue of $1,677m with a compound annual growth rate (CAGR) over the last 3 years of 18.6% per year. While the absolute number is useful to know, the key point is the trend. We want to see a consistent, upward trajectory in revenue.
Gross margin measures profitability before taking into account overhead costs – it reflects the strength of the company’s core business operations. REA’s latest reported gross margin stood at 64.3%.
Finally, the number we’re most interested in – profit. Last financial year Rea Group Ltd reported a profit of $303m. Three years ago when they made a profit of $323m, representing a CAGR of -2.1%.
Financial health of REA shares
Profitability is important, but equally important is the capital health of the company. We want to know about the company’s leverage, their capacity to pay debts, and their ability to generate a return on assets. One measure we can look at is net debt. This is simply the total debt minus the company’s cash holdings.
Rea Group Ltd’s current net debt currently sits at -$62m. Higher debt levels can increase sensitivity to interest rate changes and economic cycles.
Another figure we can look at is the debt/equity percentage. This tells us how much debt the company has relative to shareholder equity – this is also known as leverage. REA has more equity than debt, with a debt/equity ratio of 17.8%.
Finally, we can look at the return on equity (ROE). The ROE tells us how efficiently the company is turning shareholder equity into profit – high numbers indicate the company is generating a lot of value for investors, while a low number raises concerns that capital isn’t necessarily being allocated efficiently. REA generated an ROE of 18.9% in FY24.
What to make of REA shares?
With a high ROE and strong revenue growth over the last 3 years, the REA share price looks like one to watch in 2025. However, take note of the negative trend in profits – this is something to keep an eye on.
Please keep in mind this should only be the beginning of your research. It’s important to get a good grasp of the company’s financials and compare it to its peers. It’s also important to make sure the company is priced fairly. To learn more about share price valuation, you can sign up for one of our many free online investing courses.
