Online real-estate classifieds giant REA Group Limited (ASX: REA) has just released its full-year earnings results to the market, reporting a significant jump in revenues and an even bigger leap in earnings.
So What: For the 12-month period ended 30 June 2015, REA Group recorded a 20% lift in revenues to $522.9 million, compared to the $437.5 million reported in the 2014 financial year (FY14). When "other income" is included however – which takes into account the sale of marketable securities and the Squarefoot business – revenue actually rose 27% to $554.2 million.
What is even more beautiful about today's result is that EBITDA and NPAT both grew at a considerably higher pace then revenues, reflecting the fact that REA Group is able to keep more of every dollar earned after expenses such as tax, interest, depreciation and amortisation are taken into account.
The group's EBITDA, which stands for 'earnings before interest, tax, depreciation and amortisation', rose 27% to $285.8 million, while its EBITDA margin lifted from 51% to 55%. Meanwhile, REA Group's NPAT, or net profit after tax, rose 24% to $185.4 million, giving it an NPAT margin of 35%.
(Again, these numbers exclude other income, the gain on the sale of the Squarefoot business and share of losses from associates).
Despite the impressive result the shares actually fell considerably after the result was released. The stock hit a low of just $39.41 – an 8% decline – before rebounding to roughly $41 per share. Indeed, this could relate to the market's expectations with Yahoo! Finance showing forecasts of $1.43 in earnings per share (EPS) – actual EPS was $1.406 per share. These figures were based on the average estimates provided by 12 analysts.
Now What: While short-term investors were clearly disappointed with the results; long-term investors could certainly look to take advantage of the discounted price. Indeed, the group achieved 20% reported revenue growth, despite a 4% decline in listing volumes in the Australian market, according to its report.
The company said that 3.4 million people visit its sites per month, while its number of monthly page views on realestate.com.au is a staggering 991 million – 6.4 times the number two site – highlighting the dominant position it holds over the Australian market.
It said: "Our strategy to take our expertise both internationally and to new markets gathered pace this year. We have expanded into the world's largest property market, the US with Move; as well as one of the fastest growing regions through our iProperty investment in Asia." Indeed, the company recently increased its stake in the promising iProperty Group Ltd (ASX: IPP) business to 21.33%.
At the current price tag, REA Group certainly seems like a tempting long-term buy-to-hold prospect and it at very least deserves a position on your watchlist.
