REH share price in focus
Reece Limited has been operating in Australia for more than 100 years, and is today the country’s largest plumbing and bathroom supplies business.
While best known as a plumbing store, the brand has diversified to offer services and products across irrigation and pools, civil construction projects, and HVAC systems for heating, ventilation, and refrigeration.
Reece has grown revenue at a steady clip the past few years and, while the dividend yield has typically been low, the payments have been quite consistent.
REA shares
Founded in 1995, REA Group is a Melbourne-based real estate advertising company, with News Corp as its majority shareholder. It is best known in Australia for its flagship platform, Realestate.com.au.
REA Group operates globally, managing property websites across 10 countries, serving around 20,000 property agents. In Australia, its core website attracts over 55 million visits per month, and the Australian operations still contribute the majority of the company’s revenue. REA generates income primarily by charging property owners for listings, facilitated through agents who use the platform to showcase properties for sale or rent. The company also earns revenue through financial services, such as mortgage broking, though this remains a smaller portion of the business.
REA’s competitive edge lies in its strong network effects and economies of scale. With significantly more users and views than its closest competitor, Domain, REA is well-positioned to dictate pricing and market dynamics. Additionally, REA benefits from its diversified presence across the real estate ecosystem, including property listings, advertising, mortgage broking, and house-sharing services.
REH & REA share price valuation
One way to have a ‘quick read’ of where the REH share price is could be to study something like dividend yield over time. This can give us a sense of the stability of the company and whether they can consistently pay out a percentage of profits.
Remember, the dividend yield is basically the ‘cash flow’ to a shareholder, but it can fluctuate year-to-year or between payments. Currently, Reece Ltd shares have a dividend yield of around 1.86%, compared to its 5-year average of 1.06%. In other words, REH shares are trading higher than their historical average dividend yield. Be careful how you interpret this information though – it could mean that dividends are growing, or it could mean the share price is falling, or both. In the case of REH, the annual report shows last year’s dividend was greater than the 3-year average, so the dividend has been growing.
Since REA is more of a ‘growth’ company than an established blue chip, a price-sales ratio might be a more appropriate assessment. This ratio gives us an idea of how the company has historically been valued relative to its earnings, which can indicate if the company is over or undervalued today.
The REA share price currently trades at a price-sales ratio of 13.37x, which compares to its 5-year long-term average of 17.41x. So, REA shares are trading lower than their historical average.
Don’t forget, a simple multiple like this should only be the start of your research. The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! It’s a good idea to use multiple valuation methods to value a share like Rea Group Ltd.
