Shares in FTSE 100 growth stock and property portal Rightmove (LSE: RMV) are in heavy demand today. And I don’t think it’s just down to the general rebound in the UK market following yesterday’s heavy selling session. This morning’s encouraging full-year numbers must be playing a role too.
Revenue and profit rocket!
Revenue for 2021 came in at just under £305m. That’s a jump of 48% on 2020. This makes sense given that everything came to a virtual standstill in the latter and Rightmove was required to offer discounts to estate agents.
For this reason, it’s probably better to compare last year’s numbers with those achieved two years earlier. Tellingly, the former is up 5% on the pre-pandemic £289.3m achieved in 2019. In other words, Rightmove seems to be doing all the right things and getting customers to sign up for more products and package upgrades.
A similar pattern emerges when it comes to profit. Compared to 2020, underlying operating profit in 2021 was 67% higher (£226.1m). However, it was also 6% up on 2019.
Now none of this should really come as a surprise. After all, every prospective homeowner knows just how hot the UK property market has been. For evidence, the average UK house price hit £275,000 by the end of 2021.
The key question therefore, is whether it can continue.
More to come?
Thanks to ongoing innovation in its product offering, Rightmove thinks recent trading momentum is here to stay. That said, it does expect the number of transactions to slow as the housing market “normalises“. That seems infinitely prudent to me.
Sure, a holding in the FTSE 100 member certainly isn’t without risk. The UK property market may easily go into reverse if the post-pandemic economic recovery stalls (perhaps due to high inflation). Even if the company is confident it won’t be “materially impacted by the property market cycle“, I’d still need to ensure I was sufficiently diversified, just in case.
There’s also scope for the price to fall further if traders continue to shun growth stocks en masse. Despite today’s uplift, the share price is still down around 17% year-to-date.
An escalation of fighting in Eastern Europe, further news on rising prices and/or some other ‘known unknown’ could quickly erase today’s gains and send stocks crashing down again.
I wouldn’t like to be a trader right now. Thankfully, I’m far more Foolish than that.
FTSE 100 market leader
I believe that quality counts for an awful lot when it comes to generating great returns over the long term. And, based on its fundamentals, Rightmove is very much a quality business.
Some of the numbers in today’s statement were truly mind-boggling. Property hunters spent an average of 1.5 billion minutes per month on the site in 2021. That’s up from 1.3 billion in 2020 and 1 billion two years ago. Site visits were also up 56% from 2019.
To me, the £6bn-cap has the sort of ‘economic moat’ that most businesses would kill for and Warren Buffett would likely approve of.
Yes, a valuation of 26 times forecast earnings before the market opened may look expensive, given current events. However, I think it’s a price worth paying. Considering its sky-high margins and a bulletproof balance sheet, Rightmove continues to look like a great candidate for a growth-focused portfolio like my own.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
