Hot stock pick REA Group
Over the past 3 years REA Group, operator of the dominant realestate.com.au home listing site in Australia, has been a market favourite with its stock price up 3-fold. During this period the stock's PE multiple peaked at almost 40 times. But in early May the shares fell from $48 down to $43 overnight following a quarterly report that surprised the market with a departure from fantastic revenue growth rates of years past. The share price continued to slide below $38 in June.
When it comes to selling a house REA Group provides a massive audience of buyers and the best chance of achieving a high price. Yet the company only takes a very tiny fee in comparison, leaving the business with substantial pricing power and strong organic growth prospects for many years to come. At around $43 the current share price remains 10% below its trading level prior to the results announcement and the PE multiple has compressed to 25. Near term uncertainty has made the stock cheap for long term investors.