Is the REA Group Limited (ASX:REA) share price good value at $91?


The REA Group Limited (ASX: REA) share price has risen by 12.6% over the past month and it has now reached $91. Not only that, over the past year it’s up 41.7% and over the last five years it’s up 212%.

REA Group is the owner of Australia’s most popular property site, It also owns several other top Australian sites like and

Considering the REA Group share price has done so well, it’s worth considering if it’s a good idea buying at this stage. After all, a share price can go down and be expensive, or it can go up and be cheap.

REA Group continues to report solid growth – in the nine months ended 31 March 2018 REA Group revealed revenue growth of 20%, earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 21% and free cash flow growth of 9%.

However, the main reason why the share price has done so well is that investors are willing to pay a higher multiple of REA Group’s earnings, it’s now trading at around 43x FY18’s estimated earnings.

There are several reasons why investors should rightly value REA Group shares on a higher p/e ratio than previous years:

  • It has built its market-leading position even more
  • It’s doing a good job of extracting more revenue from each property advertisement with more options
  • It has recently entered the home loan space with loan broking
  • It has just acquired property data service Hometrack Australia for $130 million for another avenue of growth
  • It has a number of stakes in other property website businesses in the US and Asia

However, I think investors should be careful about investing today into REA Group shares if they want to beat the market over the next year or two.

Foolish takeaway

On the positive side, a housing downturn could mean vendors have to shell out (even more) to make their property stand out. However, I could also understand if the market becomes pessimistic about REA Group because of how property-related it is. Rising interest rates could also hurt the p/e ratio over the next two years.

I’d really like to add REA Group to my portfolio, I think it’s one of the best shares on the ASX. However, I don’t think any share is a buy at any price. For now, I’d avoid buying REA Group shares until they drop to at least the $70s, or the earnings catch up first. Over the next five to ten years I do expect REA Group will continue to beat the market. 

Here’s how you can strike it rich in the share market…

The best way to strike it rich in the share market is to buy shares that are not only cheap, but growing quickly.

Combining countless hours of research with over 30 years of hands-on stock market investing experience, The Capital Club’s founder Bruce Jackson has just published his definitive list of 3 Cheap and Good ASX Stocks for 2018.

Best of all, the report is absolutely free, exclusively for readers of The Capital Club.

In this comprehensive free report, you’ll find the name of one ASX gold stock that’s not only profitable, but trading at less than 4 times forecast profits.

You’ll also discover the name of a company one fund manager has called the cheapest stock in the ASX 100, and you’ll read about the three catalysts that could push the share price higher in the next six months.

Finally, the report names one of the cheapest retailers trading on the ASX, a company that just picked up the assets of a distressed competitor on the cheap, paying just 2 times earnings. No wonder one top fund manager thinks its share price could at least double.

With the share prices of each of these 3 companies having the potential to double or more, you’ll want to act now. Simply click here or the button below, enter your email address, and this free report will be instantly sent to you.

See the 3 stocks

Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
The Motley Fool is one of the most popular investing sites in Australia. The Capital Club publishes specially selected syndicated articles from authors including James Mickleboro, Tristan Harrison, Tom Richardson and Brendon Lau. Contact Bruce Jackson