The REA Group Limited (ASX: REA) share price has been on a rollercoaster over the last 52 weeks, having reached a high of $65.27 and a low of $47.50.
The fall in popularity of the business can mostly be attributed to a slowing property market. The number of listings in Australia is down and therefore the number of advertisements hitting realestate.com.au is slowing down too.
It's currently trading at $54.24 which I think is reasonable value, particularly when you consider the following three aspects:
Growing global presence
REA Group has a big opportunity in the USA with its 20% stake of Move Inc. which owns realtor.com, with News Corp behind Move Inc. I'm sure there is a lot of growth to come.
Asia is also a huge opportunity for REA Group. It has a presence in many South East Asian countries, such as its number one position in Malaysia. It also recently acquired a 14.7% stake in PropTiger, one of the leading sites in India. This could be a great move because India has one of the fastest-growing property markets in the world.
Growing dividends and profits
REA Group is showing that it can still grow profits and dividends nicely even though the Australian property market is losing steam. In its half year report to 31 December 2016 it reported earnings per share grew by 6% and the dividend grew by 11%.
It's a pleasing trait when a company can grow in both favourable and unfavourable conditions.
Market leader
Realestate.com.au has a very strong market-leading position in Australia. It gets 2.3x the number of visits, 5x the number of page views and visitors spend 7.6x longer on the site when compared to its main competitor.
This dominant position allows REA Group to increase prices at a strong rate, without negatively affecting its number of sales. This is a textbook example of having an economic moat.
Risks
The property market is slowing and if the number of listings continue to fall then REA Group will lose revenue, even if it can increase its profitability on each listing.
REA Group is doing a good job on keeping competitors in check but it is important to monitor if it's losing market share.
Foolish takeaway
REA Group is trading at 29x FY17's estimated earnings with a grossed-up dividend yield of 2.25%. I think the current share price of $54.24 will produce good long-term returns for Foolish investors and if the share price goes under $50 it will be an even better buy.
