REA Group Ltd (ASX: REA) shares have been a home run investment over both the short and long term.
For the year to date, REA has increased 7%, outperforming the S&P/ASX 200 Index (ASX: XJO), which is up 1%. Over the longer term, REA Group's track record is even more impressive. Over the past 5 years, it has risen 159%, crushing the ASX 200 Index, which is up 51% over the same time frame.
With this in mind, ASX investors may be wondering whether REA Group shares are still a good investment. Let's dive in.
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An online classifieds superstar
REA Group is one of the standout businesses on the ASX. Along with Seek Ltd (ASX: SEK) and Car Group Ltd (ASX: CAR), it is one of the three online classifieds businesses listed on the ASX.
It operates Australia's leading real estate classified portal, realestate.com.au. Each month, it attracts 12.4 million unique visitors to its platform. Around 50% of these are exclusive users, meaning they do not search for properties on competitors' portals. If you've bought or rented a house lately (or even searched for one), chances are you found it through realestate.com.au or Domain Holdings Australia Ltd (ASX: DHG).
Over time, Domain, its closest competitor, has ceded market share to REA Group. In April 2025, Domain had 13.1 million site visits, substantially trailing REA Group's 44.9 million. It's safe to say realestate.com.au is one of the most popular services in Australia. This entices real estate agents and vendors to list their properties on the platform, generating more business for REA Group.
This dominance has allowed REA Group to compound earnings at 15% per annum over the past decade while remaining debt-free.
There's no doubt REA Group is one of the best businesses on the ASX. But does that make it a buy today?
What about the valuation?
Great businesses don't automatically translate into great investments.
Investing is about making money. It's not just about what you buy, but also what you pay.
After substantial share price appreciation over the past five years, REA Group shares are now trading at a price-to-earnings (PE) ratio of 54 times earnings. This is a steep price to pay, which makes it less likely that the next five years' returns will match the past five years'.
Foolish Takeaway
In terms of business quality, REA Group shares tick many boxes. However, strong share price growth has pushed its valuation to 54 times earnings. Investors looking to maximise their returns might consider putting REA Group shares on their watchlist and buying at the first sign of share price weakness rather than diving in today.
