Shares in property website Rightmove (LSE: RMV) have had a good run recently. Over the last month, Rightmove’s share price has risen about 9%. Over the last year, it’s climbed around 15%.
I own RMV shares, and after the recent share price increase, I’m now sitting on a gain of a healthy 50%. This begs the question. Should I take some profits off the table, or is Rightmove still a buy?
Rightmove: strong H1 results
Rightmove’s recent half-year report, posted on 30 July, was impressive, in my view. For the six months ended 30 June, revenue came in at £149.9m, up 58% on H1 2020, and up 4% on H1 2019. Meanwhile, underlying earnings per share hit 11p, up 93% on H1 2020, and up 8% on H1 2019.
On the back of this strong performance, the company declared a dividend of 3p per share (H1 2020: 0.0p, H1 2019: 2.8p). These figures indicate Rightmove has made a full recovery from Covid-19.
Looking ahead, the company said it expects to see continued growth in average revenue per advertiser (ARPA), and continued growth in its other businesses in the second half of the year. “The Board is confident in delivering its expectations for the full year and beyond,” said CEO Peter Brooks-Johnson.
It’s worth noting that Rightmove noted its market share of time on property portals over the period was a high 90%. It also said it saw site visits of 1.4bn versus 890m in 2020 and 845m in 2019.
Overall, the half-year report indicated the company has plenty of momentum right now.
Two more reasons to like RMV shares
Moving away from the performance of the business, I can see a few other reasons to like RMV shares right now. One is earnings upgrades. Over the last month, the consensus earnings per share forecast for 2021 has risen by 0.37p to 20.8p. This is encouraging. Earnings upgrades can support a company’s share price.
Another is the share price setup. Recently, RMV hit a new all-time high. This is a positive development as it means there may be less upside share price resistance going forward. Anyone who bought the stock in the past and was sitting on a loss and waiting to break even so they could sell out, is now most likely out.
Valuation
As for the valuation, I don’t see it as stretched after the recent share price rise. Currently, RMV trades at 34 times this year’s expected earnings. Using the next year’s earnings forecast, the multiple falls to 30.
I think those metrics are quite reasonable, given Rightmove’s market dominance, its growth track record, and its historical profitability (five-year average return on capital employed of 854%).
Risks
Of course, there are a few things that could hurt Rightmove’s share price. One is the end of the Stamp Duty holiday on 30 September. This could reduce interest in UK property.
Another is an economic fall-out from Covid-19. If economic conditions deteriorate, Rightmove’s profits could take a hit.
Rightmove shares: my view
Overall however, I remain convinced the long-term risk/reward proposition here is attractive. I think Rightmove shares are still worth buying despite the fact they’re near all-time highs.
