Is Rightmove reaching the limits of growth?

Few companies in the world of UK property are faring better than Rightmove (RMV) right now. The search website has become the go-to starting point for anyone looking to buy, sell, or rent a home. That’s not slick marketing copy; the results bear this out. It boasts an 84 per cent share of the online ‘property portal’ market as its profits, revenues and dividend payments are all up in its results for the last calendar year.

However, the key question for investors is how much is too much for the company, and the extent to which it can grow in the teeth of a property downturn.

Rightmove's shares fell 2 per cent on the morning of its results as its reported earnings per share came in at the lower end of consensus forecasts from Refinitiv. However, even if the market was slightly disappointed, its price relative to its current earnings and earnings potential seems more than fair. RMV trades at 23.7 times earnings per share, which is cheaper than it has been over the course of 2022. Meanwhile, the consensus of forecasts from FactSet put its current price at 20.7 earnings per share for the end of this calendar year.

Whether it will hit the upper end of those consensus forecasts, or again hit the bottom of the range, is difficult to judge. Website activity and market share fell last year. While the company puts the latter down to a change in methodology, it does beg the question of whether it is reaching the limits of its dominance. The company identifies commercial property searches, where its market share is 65 per cent, as one avenue for growth. For now, we agree with that assessment. Buy.

Last IC View: Buy, 631p, 29 Jul 2022