In the world of high-quality Australian Securities Exchange (ASX) stocks, significant valuation drops are a rare occurrence. Yet, REA Group Ltd (ASX: REA), a leading name in the real estate sector, presents a unique opportunity for investors looking for a “buy and hold forever” stock. The company’s stock has seen a notable decline, down over 15% since August and 19% since February, despite improvements in its operating environment.
REA Group, Australia’s premier real estate portal, offers exposure to a suite of businesses including realestate.com.au, realcommercial.com.au, and Mortgage Choice, among others. The company’s strategic investments extend to Simpology, Arealytics, and Athena Home Loans, as well as international stakes in REA India and the US-based Move Inc.
Strong Market Position
REA Group’s market dominance is underscored by its significant lead over competitors. In FY25, realestate.com.au reported an average of 132.2 million monthly visits, quadrupling the nearest competitor’s traffic. More than half of its users are exclusive to the platform, a testament to its strong brand loyalty and market penetration.
The company’s audience leadership was further solidified with a 17% year-over-year increase in its lead over competitors, according to the Ipsos iris audience measurement service. This robust position allows REA Group to command premium fees for property listings, benefiting from its status as the most-visited portal by potential buyers.
Improving Financials
As a digital enterprise, REA Group capitalizes on its established digital infrastructure to enhance profit margins as it scales. In FY25, the company’s Australian revenue rose by 14% to $1.54 billion, while operating expenses increased by 12%. Indian operations saw an even more impressive revenue growth of 25% to $129 million, with expenses growing by 13%.
Overall, group revenue increased 15% to $1.67 billion, and net profit surged by 23% to $564 million.
Looking ahead, the company aims for double-digit residential buy yield growth, with a 7% national average Premiere+ price increase anticipated. This financial trajectory positions REA Group as a standout ASX stock.
Solid Outlook for the Future
The Reserve Bank of Australia’s multiple cash rate cuts in 2025 have positively impacted property demand, offering a favorable medium-term earnings outlook for REA Group. The company reported a 55% year-over-year increase in seller leads on realestate.com.au, alongside a 2% rise in average monthly buyer inquiries and a 12% increase in active members.
Despite the recent decline in its share price, REA Group remains a compelling investment. As long as the Australian property market requires advertising, REA Group’s role as a leading real estate portal ensures its relevance and potential for growth.
In conclusion, the combination of REA Group’s market leadership, financial growth, and strategic investments makes it a promising candidate for long-term investors seeking stability and growth in the ASX market.
