REH share price in focus
Reece Limited has been serving Australia for over a century and is now the nation’s largest supplier of plumbing and bathroom products.
While widely recognized as a plumbing retailer, Reece has expanded its offerings to include products and services for irrigation, pools, civil construction projects, and HVAC systems for heating, ventilation, and refrigeration.
The company has achieved steady revenue growth in recent years, and although its dividend yield is typically low, its payouts have remained consistent.
REA shares
REA Group, best known for its realestate.com.au platform, is a Melbourne-based real estate advertising company majority-owned by News Corp.
Today, REA Group operates property websites in around 10 countries used by some 20,000 property agents. In a typical month, the core Australian website gets over 55 million visits. While the business has diversified globally, Australian operations still account for the bulk of revenue. Within Australia, REA makes money by listing properties for sale or rent and charging listing fees. They also have a financial services arm offering services like mortgage broking, but this is a much smaller part of the business.
REA’s competitive advantages, like any other established platform, are network effects and economies of scale. In other words, Domain (the #2 market player) is significantly smaller than REA in terms of users and views. This gives REA greater market power and pricing control. REA also benefits from owning assets across all parts of real estate, including listing, advertising, mortgage broking, and house sharing.
REH & REA share price valuation
We would consider REH to be a ‘mature’ or ‘blue-chip’ business, so some of the metrics that could be worth considering include the debt/equity ratio, average yield, and return on equity, or ROE. These measures give us a sense of the company’s debt levels, their ability to generate returns from their assets, and their ability to consistently return profits to shareholders.
For FY24, Reece Ltd reported a debt/equity ratio of 47.2%, meaning the company has more equity than debt.
Over the last 5 years, REH has delivered an average dividend yield of 1.1% per year. This is important to note if you’re looking for income from your investments.
Finally, in FY24, REH reported an ROE of 11.2%. For a mature business you generally want to see an ROE of more than 10%, so REH clears this hurdle.
As more of a growth company, some of the trends we might consider for REA shares include revenue growth, profit growth, and return on equity (ROE). I say ‘trends’ because it’s always important to look at these figures over a few years. The trend is a much more valuable figure than a single measure at one point in time.
Over the last 3 years, REA has increased revenue at a rate of 18.6% per year to hit $1,677m in FY24. Meanwhile, net profit has fallen from $323m to $303m. As for ROE, REA’s last reported figure was 18.9%.
Please keep in mind that context is important. These metrics give us some indication of company performance, but it’s just the start of valuing REH or REA shares. To learn more about valuation, check out one of our free online investing courses.
