Why the REA Group (ASX:REA) share price thumped the market in 2020

The REA Group Limited (ASX:REA) share price was a very strong performer in 2020 despite the pandemic. Here's why it thumped the market…

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The REA Group Limited (ASX: REA) share price was a strong performer in 2020 despite the pandemic's impact on the housing market.

The property listings company's shares recorded a gain of 44% over the 12 months.

Why did the REA Group share price storm higher?

There were a couple of catalysts for the outperformance of the REA Group share price in 2020.

One of those was the company's solid performance during the COVID-19 crisis.

Despite the significant disruption caused by COVID-19, REA Group still delivered a robust FY 2020 result.

REA Group may have experienced a sizeable 12% reduction in national listings in FY 2020, but it only reported a 6% decline in revenue to $820.3 million and a 5% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to $492.1 million. The latter was supported by a 9% reduction in operating expenses to $328.2 million.

REA Group's CEO, Owen Wilson, was very pleased with the company's performance during a difficult 12 months.

He commented: "I am proud of the way REA has responded to the COVID-19 crisis, quickly adapting our products and experiences to enable Australians to continue to find, buy and sell property. In these challenging conditions, our products and services are playing an increasingly vital role in supporting our customers and vendors."

What about FY 2021?

With the worst of the pandemic appearing to be behind us, there has been a notable improvement in property listings since the end of FY 2020.

National residential listings recovered to almost pre-COVID levels during the first quarter of FY 2021 and were down just 2% on the prior corresponding period.

In light of this and a reduction in REA Group's cost base, the company returned to earnings growth during the quarter.

For the three months ended 30 September, REA Group delivered an 8% increase in first quarter EBITDA to $123.8 million. Pleasingly, listing volumes have improved further in the second quarter.

And with house prices tipped to hit record highs this year, this has many in the market believing that REA Group's growth will accelerate and it will deliver a strong half year result in February and an even stronger full year result in August.

It certainly will be one to watch in 2021.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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