REA share price in focus
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.
DOW shares
Downer is the leading provider of integrated infrastructure services across Australia and New Zealand, specialising in the construction, maintenance, and operation of transit systems, utility services, and public infrastructure.
While the name might not be instantly recognisable, their work is highly visible. For instance, Downer operates Melbourne’s Yarra Trams and manufactures the passenger trains you see in most states.
The company’s operations are divided into three primary segments: Transport, Utilities, and Facilities. The Transport division accounts for just over 50% of Downer’s revenue, with Utilities and Facilities contributing approximately 20% and 30% respectively.
REA & DOW share price valuation
As a growth company, some of the trends we might investigate from REA include revenue growth, profit growth, and return on equity (ROE). These measures can indicate the growth rates and prospects of the company, as well as their ability to generate returns from their assets.
Since 2021, REA has grown revenue at a rate of 18.6% per year to reach $1,677m in FY24. Over the same stretch of time, net profit has fallen from $323m to $303m. As for ROE, REA last reported a ROE of 18.9%.
Since DOW is more of a ‘mature’ or ‘blue-chip’ business, some of the metrics that could be considered important include the debt/equity ratio, average yield, and return on equity, or ROE. These are useful as they give us an idea of debt levels and the company’s ability to generate a return on assets and pay out profits (which is what we want from a blue chip). In FY24, Downer EDI Ltd reported a debt/equity ratio of 81.1%, meaning the company has more equity than debt.
As for dividends, since 2020 DOW has paid an average dividend yield of 3.7% per year.
Finally, in FY24, DOW reported an ROE of 3.6%. For a mature business you’re generally looking for an ROE of more than 10%, so DOW’s returns are a bit less than what we’d expect.
Keep in mind that these are only a small selection of metrics. We don’t have enough information to value the business or make an investment decision. To learn more about valuation, check out one of our free online investing courses.
