My uncle raves about how I should buy high P/E companies like REA and has been urging me to buy more but I cannot justify it after doing more research on it.
The biggest red flags are: 1. Weakness in listings volumes, 33% down nationally in April alone (leading indicator of the revenue, highly correlated), seems like people don't want to trade around houses as much during a pandemic/recession times? 2. "These challenging times are expected to adversely impact revenues" (given last half year results they were already wobbling, ~6% down from prior year, so not as much growth steam even before covid) 3. "The Group is working proactively to offset a portion of anticipated revenue losses ... operating expenses are expected to be approximately 20% lower when compared to Q4" (how I read this is that if only a portion of the operating expense saving offsets the revenue decline, then the revenue decline must be much greater than 20%)
Am I being too cautious to not want to buy more REA? I also don't want to miss out on the next big revaluation higher that my uncle keeps talking about ... but I'm also not feeling right about the value of it all when things are not as high growth looking based on their most recent announcement. Appreciate insights from the more seasoned investors out there. Cheers
REA Price at posting:
$96.77 Sentiment: Buy Disclosure: Held
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