REA

REA -  Realestate.com

04/07/26

https://www.fool.com.au/tickers/asx-rea/

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ASX:REA has seen a strong 5-year run of revenue and earnings growth, maintaining a high Return on Equity (ROE) of roughly \(27\%\)- \(28\%\). However, mounting concerns over Australian property tax reforms and lower housing turnover have weighed on the stock, causing it to fall from all-time highs. [1, 2, 3, 4, 5]

Financial Highlights (Trailing 12 Months - 2025-26)

• Revenue: \(\sim\$1.96\) billion
• Net Profit: \(\sim\$572.9\) million
• Profit Margin: \(\sim29\%\)
• Return on Equity (ROE): \(\sim28\%\)
• Debt to Equity: \(\sim4.3\%\) [1, 2, 3, 4]

5-Year Performance Breakdown

• Profitability: REA has grown its core profit and earnings per share by an average of over \(18\%\) annually during the last 5 years, supported by strong residential yield expansions and pricing power. Despite this, reported profit experienced some volatility (e.g., a recent \(24\%\) drop from the first half of FY26) due to non-core items and shifting market conditions. [1, 2, 3]

• Debt Levels: The company has maintained an exceptionally healthy balance sheet. Long-term debt is relatively low (roughly \(\$61\) million), and the debt-to-equity ratio sits at just \(4.3\%\), providing strong flexibility for share buybacks and future acquisitions. [1, 2, 3, 4]
• Returns: Benefiting from a highly scalable digital platform model, REA consistently delivers a robust ROE in the high \(20\text{s}\%\). [1, 2]

• Stock Performance: Despite solid underlying earnings growth, the share price has experienced a significant downturn from its multi-year peaks. Regulatory uncertainties regarding capital gains and negative gearing, coupled with slowing listing volumes, have led to recent broker downgrades, putting pressure on short-term market momentum.

dividends

Is the Australian property market entering a long term Bear phase? or is this downturn temporary in nature?

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PE Ratios

The mean historical Price-to-Earnings (P/E) ratio of REA Group Limited (ASX: REA) over the last 10 years is 80.25, with the current trailing twelve months (TTM) P/E ratio sitting much lower at 32.35. [1]

10-Year Annual P/E Ratio History

The following table outlines the approximate P/E ratios for REA Group at the end of each calendar/fiscal year over the last decade: [1, 2, 3]

Year [1, 2, 3, 4, 6, 7]	P/E Ratio	Valuation Context
2025	49.2x	Earnings expanded, softening the multiple despite high stock pricing.
2024	86.4x	Post-pandemic tech rebound and high growth expectations pushed multiples up.
2023	53.8x	Steady market recovery following broader tech sector corrections.
2022	37.3x	Hit a multi-year low due to macroeconomic pressures and rising interest rates.
2021	96.9x	Peaked exceptionally high as low interest rates inflated growth stock valuations.
2020	62.1x	Fluctuated wildly during early pandemic disruptions.
2019	55.4x	Supported by strong digital real estate listing dominance.
2018	48.1x	Experienced temporary spikes over 100x within specific quarters.
2017	39.8x	Inline with strong double-digit multi-year earnings growth.
2016	31.3x	Supported by robust, steady domestic real estate volumes.

Key Valuation Insights

• The Historical Baseline: REA has historically traded at a premium compared to the broader industry average of ~19.2x due to its near-monopoly market position in Australian digital real estate. [1, 2]
• Historical Extremes: Over the 40 quarters spanning this decade, REA's quarterly P/E peaked dramatically in late 2018/2021 and bottomed out during mid-2020 and 2022 corrections. [1, 2]
• Current Market Valuation: At ~32x, REA's current multiple suggests that the "euphoria premium" has cooled significantly. It is currently trading well below its 10-year mean, presenting a historically lower valuation relative to its past growth cycles. [1, 3]

charts

2022 & 2016 - reasonable PEs

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ROIC vs WACC

Over the last 10 years, REA Group's (ASX: REA) Return on Invested Capital (ROIC) has sat far above its Weighted Average Cost of Capital (WACC), with ROIC ranging roughly between 25% and 34% against a WACC averaging around 8% to 12%. This wide, consistent positive spread shows the company creates massive economic value through its dominant digital property network. [1, 2, 3, 4]

Return on Invested Capital (ROIC)

Current ROIC: Approximately 25.1% to 33.9% depending on trailing twelve-month calculation methodologies.
10-Year Trend: Maintained at exceptionally high levels due to strong operating margins (over 42%) and an asset-light digital business model. It expanded from mid-teen recovery points up past 30% during peak cycle years. [1, 2, 3, 4, 5]

Weighted Average Cost of Capital (WACC)

Current WACC: Estimated around 7.8% to 12.0% depending on shifting risk-free rates and market risk premiums.
10-Year Median: Historically anchored near a 10.0% median baseline, benefiting from a clean, nearly debt-free balance sheet with minimal debt weighting. [1, 2, 3, 4, 5]

Value Creation Spread

Spread Magnitude: A positive spread of roughly 15% to 25+ percentage points (ROIC minus WACC) has persisted for the full decade.
Implication: Every dollar reinvested back into core operations or platform expansion yields returns well above the cost of raising capital, confirming a durable economic moat

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