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The Rea Group Ltd share price has surged by 9.4% since the beginning of 2024, capturing attention among investors. In comparison, the Woolworths Group Ltd share price is currently 13% above its 52-week lows. This raises an important question: Is the REA share price currently seen as affordable?
REA Group Ltd (ASX:REA)
Founded in 1995 and headquartered in Melbourne, REA Group Ltd is a leading real estate advertising company, predominantly owned by News Corp. The company operates primarily through its Realestate.com.au platform in Australia and extends its reach globally with property websites in approximately 10 countries, serving around 20,000 agents.
In a typical month, Realestate.com.au attracts over 55 million visits, showcasing its dominant presence in the Australian property market. REA Group's revenue is mainly generated from listing properties for sale or rent on its platform, where property owners or agents pay to feature their listings. Additionally, REA Group earns from financial services such as mortgage broking, although this contributes less significantly to its overall revenue.
The strength of REA Group lies in its established platform, which benefits from network effects and efficient scale. Its dominant position means that it can command higher charges compared to competitors like Domain, which trails behind in terms of user numbers and site visits.
Woolworths Group Ltd (ASX:WOW)
Founded in 1924, Woolworths Group Ltd is a major retail operator in Australia and New Zealand, with over 3,000 stores and a workforce exceeding 100,000 employees. Woolworths stands as Australia's largest company by revenue and market share.
The company’s core operations include supermarkets under the Woolworths brand in Australia and Countdown in New Zealand, as well as discount department stores through the Big W brand. Woolworths also engages in business-to-business (B2B) operations with brands like PFD. Its supermarkets hold a dominant position in the Australian market, commanding more than 35% of the supermarket share.
Evaluating the REA Share Price
When assessing the value of REA Group Ltd shares, one common approach is to examine its price-to-sales ratio over time. Currently, REA Group Ltd shares have a price-to-sales ratio of 15.83x. This figure is slightly below the company’s 5-year average of 16.25x, suggesting that the shares are trading below their historical average.
It’s important to note that this is just one method of valuation and should be considered in context with other factors. Relying solely on one metric might not provide a complete picture of the company’s value.
REA Group Ltd’s share price has shown significant growth in 2024, its current valuation relative to historical averages might suggest an opportunity for consideration. As always, a comprehensive assessment involving multiple factors is advisable for any investment decision.
