Stockopedia comments Graham Neary - RMV2 Sep 2024 11:01
Graham’s view
As a shareholder in Rightmove for several years, it’s natural for me to think that Rightmove is undervalued.
For a company with almost monopoly-like control over the lucrative industry of property search, I’ve grown accustomed to the multiples shown above, but didn’t fully agree with them. Yes, Rightmove has offered little in terms of short-term growth. But when it comes to quality (the ability to make money from a small asset base) and safety (a market position that is secure against competition), Rightmove is one of the most attractive shares that I’ve ever seen.
The safety argument did suffer a blow over the past year, when US-based CoStar picked up OnTheMarket (OTMP) for £100m, with ambitious plans to grow that business. These plans are currently in motion and CoStar recently claimed that visits to OnTheMarket in June 2024 were up 78% year-on-year. However, I’m not sure yet if this has made any inroads into Rightmove’s commanding market share of over 80% (OTMP’s market share gains, if any, could have come at the expense of Zoopla).
So in summary, I’ve continued to believe that RMV deserves an earnings multiple of at least 20x.
Today’s announcement has sent the shares to levels not seen since 2022:
The valuation here is now in the mid-20s in terms of PER, which to my shareholder eyes is a better reflection of underlying fair value than last night’s undisturbed price.
But I do believe that this is a “sleep-sound” type of stock (if such a thing exists). Therefore, with a long enough time horizon, I doubt that buyers at the current level will regret their investment, regardless of whether or not the Australians pick it up.
For what it’s worth, I’d want to receive a multiple of >30x, if I was going to happily give away my RMV shares, i.e. I’d be looking for in excess of 800p.
https://app.stockopedia.com/content/small-cap-value-report-mon-2-sept-2024-placeholder-1006704?order=createdAt&sort=desc&mode=threaded
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