Why Rightmove plc could be a terrific stock for savvy growth seekers

Finding stocks which offer high growth at a reasonable price is never easy. However, adding a company which has a stable business model and a strong track record of growth to the mix makes the task even more challenging. That's particularly the case when the FTSE 100 is close to an all-time high, and the UK economy faces an uncertain future thanks to Brexit. However, online property portal Rightmove(LSE: RMV) could offer those attributes following its half-year results release on Friday.

Improving performance

Rightmove's first half of the year was yet another positive one for the business. This came at a time when the backdrop to the UK property market was highly uncertain. The volume of houses listed in the UK continues to come under pressure, while house price falls may cause some buyers to wait for potentially cheaper prices further down the line.

Despite this, the company recorded a rise in revenue of 11% versus the prior year. This was driven by continued growth in its Agency and New Homes businesses. Underlying operating profit rose by the same amount as sales, while interim dividends per share moved 16% higher.

Part of the reason for the success of the business during the six-month period was record customer numbers, with Agency and New Homes customers up 237 since the start of 2017 to 20,358. Rightmove also remains the dominant player in the industry, with a third more UK residential properties advertised on its site versus the next biggest portal. Traffic growth to the website has also been strong, with it rising 3% versus the prior period.

Investment case

In the last five years, Rightmove has been able to grow its bottom line at a double-digit pace on an annualised basis. This shows the level of consistency which the company offers, and this is forecast to continue into the next two years. In the current year, growth in earnings of 10% is forecast, with this figure due to increase to 11% next year. This is around 50% higher than the wider index's expected growth rate.

While the company currently trades on a price-to-earnings growth (PEG) ratio of 2.2, its consistency and relatively low risk profile mean it could offer capital growth potential. Its stock price is 172% higher versus five years ago, and more index outperformance could be ahead in the long run.

Another opportunity

Also offering upside potential within the property industry is estate agency Savills(LSE: SVS). The company has recorded double-digit earnings growth in each of the last five years and while its forecasts could be downgraded over the medium term, it has a strong position within its key markets.

Savills trades on a price-to-earnings (P/E) ratio of 13.6, which seems to suggest fair value for money at the present time. Its dividend yield of 3.3% is well-covered at 2.2 times, which indicates dividend growth could be brisk in the long run. This mix of income, value and growth potential means that the stock could be worth buying right now. Certainly, volatility and instability may be present in the short run as UK property prices are falling. But this could equate to an attractive buying opportunity.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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