The company, which is the dominant player in its field, is held to a pretty high standard thanks to its premium rating. Despite falling in value its shares still trade on a enterprise value to earnings before interest, tax, depreciation and amortisation (EV/EBITDA) ratio of more than 23 times.
Taking a view on the stock's future trajectory means deciding if it can continue to grow revenue, margins, profit and cash flow by boosting Average Revenue Per Advertiser (ARPA). This metric was up 10% year-on-year to £754 per month. Material but fairly small beer for most estate agencies for whom such an outlay would typically represent the commission earned on two-and-a-half property transactions on an annual basis.
Being the market leader creates a virtuous circle for Rightmove. Its site has the most listings and is therefore the one which prospective property buyers will go to when looking for their next home. This reinforces its position as a must-have product for estate agencies and giving it significant pricing power when it comes to securing subscriptions from agencies.
The company is committed to returning cash to shareholders having paid out £112.5 million in 2015 through dividends and share buybacks.
Liberum remains bullish with a 'buy' recommendation and £42.95 price target. Analyst Ian Whittaker notes: 'This set of results reinforces our thesis that Rightmove's dominant market position is underpinning their ability to drive ARPA growth.'