A2M share price in focus
Founded in New Zealand in 2000, The a2 Milk Company specialises in dairy products that contain the naturally occurring A2 protein type, sold under the a2 brand.
The company does not produce its products directly but partners with over 25 certified dairy farms across Australia, where suppliers handle the production. Additionally, its instant formula products are manufactured by its supply partner, Synlait Milk, in New Zealand.
A key selling point of a2 Milk is its claimed health benefits, particularly its easier digestibility compared to regular milk. This makes it a suitable option for people who typically experience digestive issues with standard milk.
REA shares
REA Group, best known for its realestate.com.au platform, is a Melbourne-based real estate advertising company majority-owned by News Corp.
Today, REA Group operates property websites in around 10 countries used by some 20,000 property 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 bulk of revenue. Within Australia, REA makes money by listing properties for sale or rent and charging listing fees. They also have a financial services arm offering services like mortgage broking, but this is a much smaller part of the business.
REA’s competitive advantages, like any other established platform, are network effects and economies of scale. In other words, Domain (the #2 market player) is significantly smaller than REA in terms of users and views. This gives REA greater market power and pricing control. REA also benefits from owning assets across all parts of real estate, including listing, advertising, mortgage broking, and house sharing.
A2M & REA share price valuation
As a growth company, some of the trends we might investigate from A2M 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, A2M has grown revenue at a rate of 11.6% per year to reach $1,673m in FY24. Over the same stretch of time, net profit has increased from $81m to $168m. As for ROE, A2M last reported a ROE of 12.8%.
Over the last 3 years, REA has increased revenue at a rate of 18.6% per year to hit $1,677m in FY24. Meanwhile, net profit has fallen from $323m to $303m. As for ROE, REA’s last reported figure was 18.9%.
Please keep in mind that context is important. These metrics give us some indication of company performance, but it’s just the start of valuing A2M or REA shares. To learn more about valuation, check out one of our free online investing courses.
