After the company’s Friday announcement of an increase in operating profit for the whole year and an increase in the dividend, we took a deeper look at Rightmove shares.
Even if its earnings results were generally favorable, Rightmove shares (LSE: RMV) decreased on Friday. The company’s stock fell 2.5% in morning trading, bringing its 12-month loss to 18%.
Although the UK housing market may not be particularly robust, Rightmove is unaffected by changes in house values. Instead, the company is funded by the monthly subscription fees that users pay to display all of their properties on the website as well as other forms of advertising revenue.
Are investors advised to buy this stock? We’re definitely giving it some thought.
Resilient traffic
The largest online real estate property portal in the UK is maintained by Rightmove. Even though the housing market is going through one of its most challenging times in more than a decade, Rightmove revealed a rise in operating profit for the entire year.
According to the company, “resilient traffic despite a substantially less frenetic real estate market than 2021” has been observed.
Revenues increased 9% to £332.6m while operating profit increased 7% to £241.3m. Profits per share increased by 9% to 23.8p, implying a price-to-earnings ratio of 22.9, while the total dividend increased by 9% to 8.5p per share for the year. The yield is still under 2%.
16.3 billion minutes were spent on the site by users in total during the year. Although it was higher by 34% than the pre-pandemic milestone year of 2019, it was lower than the record-breaking 18.3 billion in 2021, when the housing market was booming.
Clients growth strong
The positive news was also reported regarding revenue generation. Customers kept upgrading their packages and using more digital goods, according to the platform’s owner.
Revenue per advertiser climbed 11% to £1,314 per month as a result, reflecting this trend. This was the second-highest absolute ARPA growth year in history.
Rightmove is not much impacted by the property market cycle, save for the most exceptional cases, according to the company, which stated in a statement.
What about the future of Rightmove Shares?
There are various advantages to consider in the short term. First off, the company claims that it is not much impacted by fluctuations in the property market, but it is true that site visits are influenced by an interest in the industry. Although home sales are declining, the rental industry is booming across much of the nation. Rightmove also provides rental advertising, of course.
Additionally, the company stated that significant ARPA growth in 2022’s second half increases confidence in future ARPA growth in 2023. Rightmove anticipates that customer numbers will exhibit a similar trend in the second half of 2022.
The fundamentals are incredibly strong in general. An enormous underlying operating margin of 73% is predicted for this year. It has a solid balance sheet, outstanding metrics for cash generation, and a buyback program that ought to drive up the share price over the next few years.
So, would you purchase Rightmove stock? Although the figures are quite excellent, we’re not sure how the company justifies such a high price-to-earnings ratio. Moreover, given that the business already rules the industry in which it works, we’re unsure of where that growth is coming from.
We’ll keep an eye on this one, but we’re not ready to buy it just yet.
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