Why investors dumped REA Group Limited shares today

Online real estate portal REA Group Limited (ASX: REA) has unveiled its full-year earnings results today.

The company’s top line grew 20% over the year to $629.8 million, which is in line with the $314.8 million of revenue it reported for the first-half of the year. Net profit after tax (from continuing operations) also grew 16% to $214.5 million, with $121 million of that coming in the first half.

Earnings per share (EPS) was 162.6 cents, also up 16% for the year, while it announced a final dividend of 45.5 cents per share, taking the total for the year to 81.5 cents. The dividend will be paid on 15 September 2016, with a record date of 24 August.

Indeed, REA Group’s Australian division remained its primary source of growth. The company reported a 17% increase in local revenues to $555.2 million with a 7% increase in the number of agent customers. It also said’s market share of all residential property listings nationwide is 94%, which is 17% higher than its nearest competitor.

What’s more, the Australian division’s EBITDA margin rallied to 62.3% for the year, compared to 60.9% in FY15. The group’s EBITDA margin remained steady at 55% (note that EBITDA is earnings before interest, tax, depreciation and amortisation).

With Australia accounting for more than 88% of group revenue, REA Group will continue to invest in growth outside of that market. Revenue also grew in Europe, North America and Asia, with REA Group also celebrating its acquisition of iProperty Group during the period.

However, investors will be disappointed with the outlook provided by management regarding local growth so far in financial year 2017. REA Group blamed uncertainty surrounding the recent Federal election for an 11% dip in July listings (compared to July 2015), with first half revenue expected to skew more towards the second quarter.

As a result, shares of REA Group fell 7% to $55.99, although they did trade as low as $55.62 shortly after the market opened.

Unfortunately for investors in the space, it isn’t the first time the market has been disappointed with results from the online classifieds industry this August. Carsales.Com Ltd (ASX: CAR) shares have also fallen 6.5% today, while iCar Asia Ltd (ASX: ICQ) shares crashed almost 17% on Monday.

Discover How 1 Man Made 100x His Money After 50

Few know, that as Warren Buffett blew out the candles on his 50th birthday cake, he had just 1% of his current fortune. Think about it: At an age when most give up hope, Buffett was just getting started on the remaining 99% of his fortune. Goes to show you that it's never too late for you to potentially get rich. Which is why we've gathered the strategies we learned from Buffett, distilled them down to 11 simple lessons, and put it in an exclusive report for you to claim. Just click here to learn more about this handy investing guide.

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.