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right movement (LSE:RMV) could be the best stock in the FTSE 100. The company is in excellent shape and looks poised to return cash to investors for a long time to come.
Rightmove’s share price fell 30% in 2022. But the underlying business appears to be going from strength to strength.
As a result, I believe the company’s shares are worth better than they were in early 2022. Today’s prices look like a buying opportunity to me.
Profits
Mr. Market was not impressed by Rightmove’s earnings last week. The stock fell slightly on Friday as the FTSE 100 rose.
Despite rising inflation and a slowdown in the UK property market, the company reported £333m (compared to £305m in 2021). Earnings per share were 23.4 pence (versus 21.3 pence).
The amount of time users spent on its platform remained above pre-pandemic levels. And the company returned £198 million to shareholders through dividends and share buybacks.
Rightmove is currently in the process of changing its CEO, with Johan Svanström taking over from Peter Brooks-Johnson. This is probably the biggest risk with stocks right now.
Changes in leadership can be disruptive for companies and this is something investors will want to keep an eye on. But the new CEO inherits a business in a strong position.
Rightmove has no debt, low operating costs, and a competitive position that’s hard to disrupt. All of this makes it a solid company to take over.
Valuation
Earnings growth of 10% may not sound like much for a stock with a price-earnings (P/E) ratio of 25. But the company has at least three ways to increase its earnings per share.
The first is by raising prices to advertisers. Rightmove’s user base makes it a platform homebuilders and real estate agents need to be on, giving it pricing power.
In its report, the company announced that average revenue per advertiser increased 11% over the prior year. Despite this, the number of advertisers remained virtually unchanged.
The second is by moving to different markets. Rightmove has been developing and growing platforms for commercial properties and listings abroad.
Both did well in 2022. The commercial property platform grew 19% and the overseas listings platform achieved 21% growth.
The third is by repurchasing shares. Buybacks reduce the total share count, which means that each remaining share has a greater right to claim the company’s overall earnings.
In 2022, Rightmove’s buybacks reduced its number of shares outstanding from 859 million to 835 million. And management reiterated its commitment to make more buybacks in the future.
A stock to buy
Rightmove’s P/E ratio could make the stock look expensive. But I think it has some of the best growth prospects of any stock in the FTSE 100.
Combined with the intrinsic strengths of the business, this makes the stock attractive. That’s why I think it’s a buy at today’s prices.
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