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Onthehouse Holdings Ltd reports: Here’s what you need to know

Disruptive online real estate group Onthehouse Holdings Ltd (ASX: OTH) today released its results for the year ending 30 June 2014, with top line revenue growth of 8% to $26.1 million. Shares fell by 1.7% following the announcement, possibly due to significant decreases in the company’s net profit after tax (NPAT) and operating cash flow figures.

So What: Onthehouse reported NPAT of $423,000 and operating cash flow of $6.2 million, which were down from $1 million and $7.2 million in FY13 respectively. However, these figures were heavily impacted by the company’s investment in recruiting talent as well as building its products and software platforms which are vital to the company’s long-term success.

Onthehouse has the advantage of first mover in an area not yet tapped by key rivals such as realestate.com.au and domain.com.au, owned by REA Group Limited (ASX: REA) and Fairfax Media Limited (ASX: FXJ). While their platforms are largely based on classifieds, Onthehouse’s website provides more in-depth data regarding property history and valuations – regardless of whether or not the properties are listed on the market. Given its small size compared to Domain and realestate.com.au, it is imperative that Onthehouse sacrifices short-term earnings to invest heavily in developing its platforms.

Real Estate Solutions, which is the company’s primary segment, grew revenues by 4% to over $23 million for the year, while its smaller Consumer Online division increased revenue by 51% to over $3 million. Pleasingly, the Onthehouse.com.au site is now engaging traffic of 1.7 million unique monthly browsers, while their total online media network now reaches 5.6 million unique visitors monthly. This has been achieved with limited marketing spend, highlighting just how rich in content the sites are.

Now What: Those focused on the short-term have likely been turned off by the company’s dampened earnings, but long-term investors should be able to recognise the incredible opportunity Onthehouse is building towards. Onthehouse boasts a bright future and a buy today could reap significant rewards over the coming years.

Another small-cap company I am very bullish on recently announced its seventh consecutive year of growth. Better yet, the Motley Fool’s top analysts believe its best days are still ahead of it…

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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