The REA Group Limited (ASX: REA) share price has fallen from its all-time high of $93.35 in August, recently hitting below $70, a decline of over 25% and its lowest price since October 2017.
While many growth shares have seen savage sell-offs in the last four months, including WAAAX stocks Afterpay Touch Group Ltd (ASX: APT), Appen Ltd (ASX: APX), The A2 Milk Company Ltd (ASX: A2M) and CSL Limited (ASX: CSL), REA shares are currently trading at $71.19, bouncing off its 52-week low.
REA has been a share market darling for the last few years and it's easy to see why – this company has seen phenomenal growth numbers as it disrupted the traditional model for advertising and interacting in the property market, becoming the industry leader in its field. REA Group is hardly a household name, but we cannot say the same for their flagship platform – realestate.com, which is the most popular real estate website in Australia by a wide margin, boasting almost 75 million monthly users – over twice that of their nearest competitor. REA also own around 20 other websites around the world which mostly focus on property markets in various countries.
REA Group's primary revenue source comes from property listings on their websites, for which the sellers are charged a fee. As the digital economy continues to grow, REA Group is in prime position to take advantage of the increasing trend towards online advertising. REA has already used their business model to increase their revenue stream substantially and consistently each year over the past five years, with a 20.3% increase from 2017 to 2018 to cap it off. This has also allowed them to increase their dividend every year since 2009, which is currently yielding 1.67% grossed-up. If this dividend continues to increase (by historical patterns, likely), it presents as an excellent growth option for yield-seeking investors.
Is the REA share price a buy?
Like many growth stocks, the REA share price was hit significantly by the share market correction in October.
However, the companies' fundamentals remain strong and unaltered, and property is not something that is going to stop being traded. Property is an asset that gets bought and sold in good times and in bad, and REA group is always there ready to take its slice of the profit. With a current P/E ratio of 37.76, investors know this and that's why a stock market overreaction presents a lucrative opening to pick up shares of growth machines like REA Group for a discount.
Foolish Takeaway
I think REA Group shares are a worthwhile addition to any future-orientated portfolio, as they continue to remain in the vanguard of the online economy. The increasing dividends also indicate the opportunity to amass shares of what is likely to be a hefty dividend paying company into the next decade and beyond. If there was any further correction in the REA share price, I would be looking to open a substantial position in this stock.
