Rightmove (LSE: RMV) shares are often ignored by retail investors. This is a little surprising to me, as they’ve been a very good investment over the long term.
Here, I’m going to look at how much I’d have today if I had invested £5,000 in the FTSE 100 stock a decade ago. Let’s crunch the numbers.
A great investment
10 years ago, the shares were trading at 179p (after accounting for the 10/1 stock split that occurred in 2018). Today, however, they’re changing hands for 563p. That represents a gain of around 215%.
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This means that if I had invested £5k in the company back then, my investment would now be worth approximately £15.7k. That’s a good result. It represents a gain of just over 12% per year – a much higher return than the FTSE 100 index has generated.
At one stage, my investment would actually have been worth a lot more. Back at the start of 2022, Rightmove shares were trading near 800p. Back then, my £5k investment would have been worth about £22.5k.
It’s worth pointing out that Rightmove has paid a small dividend nearly every year over the last decade. So, I would have picked up a little passive income over the years too, alongside my capital gains.
A high-quality business
Looking at these numbers, there are several takeaways, to my mind.
One is that it can really pay to focus on ‘quality’ when investing in shares.
Rightmove is a high-quality business. For starters, it has a powerful brand and a high market share. It’s generally the first place people go when looking for a house in the UK.
Rightmove continues to be the place that people turn to and return to first,
Rightmove CEO Peter Brooks-Johnson
with an average of over 1.35bn minutes spent on our platform every month in 2022.
Secondly, it’s very profitable (it’s one of the most profitable companies in the FTSE 100). Over the last three years, return on capital employed (ROCE) has averaged 233%.
Third, it has a strong balance sheet with minimal debt. Overall, it has a lot of quality attributes.
Another takeaway is that valuation isn’t everything. Rightmove has never been a cheap stock. It’s always had a higher valuation. Yet that hasn’t stopped it delivering excellent, market-beating returns for investors.
Finally, these calculations show the power of investing for the long term. Over the last decade, the UK stock market has had many ups and downs. Brexit, Covid, and the energy crisis in 2015 all dragged stocks down significantly. Yet Rightmove shares have still managed to deliver a return of more than 12% per year over this period.
Rightmove shares today
Are the shares worth buying today? In my view, yes. I think the share price can continue to rise from here.
They’re not without risk. For example, a proper property market crash in the UK (like 2008-09) could send the stock down.
However, in my view, Britons are not going to lose interest in real estate any time soon. So, the company’s platform should remain popular.
And with a new CEO coming in this month (who has vast experience growing businesses) there are reasons to be optimistic in relation to the outlook.
