It sounds great to own high-quality ASX stocks, but it's rare for their valuation to drop heavily. The magnificent ASX stock REA Group Ltd (ASX: REA) fits the description I'm talking about as a buy and hold forever idea.
For starters, the valuation has reduced in the last few years. As the chart below shows, it's down more than 15% since August and it has fallen 19% from February.
Considering the improvement in the operating environment during that period, this seems like a good time to consider Australia's leading real estate portal.
Owning REA Group means gaining exposure to realestate.com.au. It also owns a number of other businesses including realcommercial.com.au, flatmates.com.au, property.com.au, Mortgage Choice, PropTrack, Campaign Agent and Realtair.
It also has investments in Simpology, Arealytics and Athena Home loans. Finally, it has stakes in REA India, Easiloan (an Indian loan technology business) and Move Inc (a US property portal business).
There are multiple reasons to like this business, so let's get into it.
Image source: Getty Images
Strong market position
REA Group has a dominant market position in Australia, with Domain being the only notable competitor.
In FY25, Realestate.com.au saw 132.2 million average monthly visits, four times more monthly visits than the nearest competitor on average. More than half the people using realestate.com.au use it exclusively.
The company said it extended its audience leadership in FY25, increasing its lead over the nearest competitor by 17% year-over-year, according to the Ipsos iris audience measurement service.
REA Group said its personalised experiences supported deep consumer engagement, particularly its focus on engaging owners, which helped drive a significant increase in seller leads delivered to its customers.
This leading position has enabled the business to charge a sizeable fee for property sellers to list their property on the most-visited portal by potential buyers.
Improving financials
As a digital business, REA Group is able to deliver rising profit margins as it grows in size because it has already built its digital infrastructure. The company's revenue can climb faster than expenses, which is one of the reasons why I'd call it a magnificent ASX stock.
In FY25, Australian revenue climbed 14% to $1.54 billion and operating expenses increased 12%. Indian revenue climbed 25% to $129 million and operating expenses grew 13% to $158 million.
Overall, group revenue increased 15% to $1.67 billion and net profit surged 23% to $564 million.
The company is targeting double-digit residential buy yield growth, with a 7% national average Premiere+ price rise. It's expecting to increase its profit margins in FY26.
Solid outlook for the magnificent ASX stock
There have been multiple RBA cash rate cuts in 2025 to date, which is a significant positive for boosting property demand, which could help earnings in the medium-term
The outlook for the company looks positive and it's showing in the numbers that the company can see.
In FY25, the business reported a 55% year-over-year increase in realestate.com.au seller leads as well as 2.3 million average monthly buyer enquiries, up 2% year-over-year. It also saw a 12% year-over-year increase in active members.
Following the decline of the REA Group share price, I think this magnificent ASX stock is an appealing long-term buy and hold. As long as Australian property needs advertising, I think this can be an attractive investment (forever).
