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.
QAN shares
Qantas was founded in 1921 and is today Australia’s largest airline operator by fleet size, number of international flights, and number of destinations.
It’s involved in the operation of domestic and international flights under its Qantas and Jetstar brands, as well as freight services and the management of its frequent flyer loyalty program.
Despite (or perhaps because of) its significant market power, the airline has fallen out of favour with Australian consumers over the last few years, consistently ranking as one of the country’s most distrusted brands according to Roy Morgan surveys. Still, with a huge market share and more services than other airlines they’ve managed to continue growing revenue and profit since the end of the pandemic.
REA share price valuation
As a growth company, some of the trends we might investigate from REA include revenue growth, profit growth, and return on equity (ROE). These measures can indicate the growth rates and prospects of the company, as well as their ability to generate returns from their assets.
Since 2021, REA has grown revenue at a rate of 18.6% per year to reach $1,677m in FY24. Over the same stretch of time, net profit has fallen from $323m to $303m. REA last reported a ROE of 18.9%.
Since QAN is more of a ‘mature’ or ‘blue-chip’ business, some of the metrics that could be considered important include the debt/equity ratio, average yield, and return on equity, or ROE. These are useful as they give us an idea of debt levels and the company’s ability to generate a return on assets and pay out profits (which is what we want from a blue chip). In FY24, Qantas Airways Ltd reported a debt/equity ratio of 2241.8%, meaning the company is leveraged (it has more debt than equity). Higher debt levels comes with increased risk so it’s important that a leveraged company has stable returns and the capacity to pay interest on its debts.
As for dividends, since 2019 QAN has achieved an average dividend yield of 1.2% per year.
Finally, in FY24, QAN reported an ROE of 823.0%. For a mature business you’re generally looking for an ROE of more than 10%, so QAN clears this hurdle.
It’s important to keep in mind that these are only a small selection of metrics and don’t give us enough information to value the business or make an investment decision. To learn more about valuation, check out one of our free online investing courses.
