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3 better buys than Realestate.com and Carsales.com

REA Group (ASX: REA), operator of Realestate.com, reported full year results yesterday, including sales growth of 21% and after-tax profit growth of 26%. The company also raised its dividend by 26%. In all, it’s another strong set of results for this ASX success story.

Likewise, Carsales.com (ASX: CRZ) reported results today, showing operating revenue growth of 17% as well as after-tax profit growth of 17%.

If there’s a downside to these strong growth numbers – especially considered against the slowing Australian economy – it’s the high price of the shares. Mr. Market seems to have already priced in this growth (and a great deal of future growth as well) to the share price of each company.

Despite the recent dip, REA shares are still trading for a whopping 40 times earnings and 12 times sales. Carsales.com shares are going for 30 times earnings and nearly 12 times sales. You couldn’t call either cheap, or even reasonably priced.

With this in mind, opportunistic investors may want to look beyond these two companies and examine a few more ASX internet-based businesses. For instance, the microcap Zillow-like Onthehouse (ASX: OTH) and recent listing and comparison website operator iSelect (ASX: ISU) can be considered to be in a far earlier stage than either Realestate.com or Carsales, and both boast much cheaper shares.

Meanwhile, shares of online travel business Wotif.com (ASX: WTF) have fallen over the last 12 months, underperforming the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) by about 6 percentage points, not including dividends. Now the shares look to be entering good-value territory at about 18 times earnings, especially with a new CEO in and plans afoot to reinvigorate the company’s core business.

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Motley Fool writer/analyst Catherine Baab-Muguira owns no shares in any company mentioned in this article.

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