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Is REA Group Limited the best growth stock on the ASX?

Credit: chrisjtse

The share price of online real estate business REA Group Limited (ASX: REA) climbed 5% to a record high of $52.75 today despite the company releasing no specific news to the ASX.

In my opinion it remains possibly the best growth business on the ASX and has some of the strongest long-term growth potential.

REA Group is majority owned by News Corp (ASX: NWS) and is essentially a digital vehicle for mopping up global market share as real estate advertising revenues continue to migrate online from old world style media and information sources.

The business not only operates Australia’s most successful online real estate portal in realestate.com.au, but also has been on an aggressive international shopping spree as News Corp’s proxy for winning its share of classified advertising revenues in the digital future.

I would not bet against the ambitions of REA Group and News Corp in beating the competition in this space in what is likely to prove extremely lucrative business for market-leading websites long into the future.

Property is a potent asset class never to be disrupted and REA Group now holds stakes in market-leading property websites in France, Italy, Luxembourg and the United States.

Moreover it’s on the verge of a full takeover of iProperty Group Ltd (ASX: IPP) having offered $4 per share for the Asia-focused junior rival at a valuation of around $740 million in a handsome pay day for iProperty shareholders.

iProperty operates in the fast-developing markets of Asia where the migration of advertising revenues online in property markets is less developed. It already operates leading property portals in Malaysia, Hong Kong, Thailand and Indonesia and needless to say looks an extremely attractive long-term growth prospect.

REA Group will fund the acquisition from cash and a $480 million debt facility that shows how it has the cash flows and firepower to blow competitors in the quest for digital advertising growth out of the water.

For example Fairfax Media Limited (ASX: FXJ) has been investing heavily in its Domain property portal, but remains far behind the News Corp / REA Group combo in their aggressive growth strategy.

REA Group is on a big valuation, but rightly so in my opinion and over the long-term it looks one of the best growth businesses on the ASX.

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Motley Fool contributor Tom Richardson owns shares of iProperty Group Limited and REA Group Limited. 

You can find Tom on Twitter @tommyr345

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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