The Denver, Colo.-based real estate company Re/Max Holdings has filed for a $100 million Initial Public Offering (IPO) with U.S. regulators and is planning on listing its class A shares on the New York Stock Exchange under the symbol RMAX. Re/Max's public offering, a first for the 40-year-old company, is a sign that Re/Max wants to better ride a rising U.S. housing market.
Is Re/Max a good opportunity for investors to ride the bullish trends of the United States housing market, or should investors hold back snapping up shares at Re/Max's IPO? Based on the macroeconomic conditions of the housing market and the success of publicly listed Re/Max competitors, Re/Max could provide a great opportunity for long-term investors.
However, any valuation analysis that might come into play later would be moot at this point, since Re/Max hasn't yet detailed the number of shares being offered and the final price of the IPO.
Re/Max's success as a private company and opportunity to expand
Re/Max operates through a network of agents and franchises. Established in 1973 from a single office in Denver, Colo., Re/Max has grown to represent more than 92,000 real-estate agents in about 95 countries. Re/Max holds the prestigious position of being No. 1 in market share in the U.S. and Canada since 1999.
Although Re/Max does hold this No. 1 position, it has room to expand internationally, and even domestically. Re/Max has logged increasing revenue generation: It reported unaudited revenue of $143.7 million in 2012, up from $138.3 million in 2011. Based on this information, Re/Max appears to be a well-positioned leader in the real estate market for the future.
Macroeconomic factors and previous IPOs bode well for Re/Max
The U.S. housing market is currently doing quite well, which has boosted the bottom line of several public real estate companies. For example, Re/Max competitor Realogy (NYSE: RLGY ) and online real estate companies Zillow (NASDAQ: Z ) and Trulia (NYSE: TRLA ) have seen strong performance since going public:
Even if the housing market does sputter, more established companies like Re/Max and Realogy will be able to weather the storm. Realogy has provided an example for Re/Max in its successful $1.1 billion IPO, and the current market expansion provides room for both Re/Max and Realogy to grow.
The business models of Zillow and Trulia are benefiting from the market upswing as well, but they haven't been given the opportunity to show whether or not they would have the staying power to do what is necessary to make it through tough times. As of now, it appears Zillow would have the upper hand among online real estate companies because of its brand power.
Zillow has been the biggest winner thus far out of the three public companies discussed here because its business model is convenient for real estate agents and potential buyers to use. The company recently acquired StreetEasy to strengthen and round out its business in the New York area. Zillow is giving Trulia a pretty rough ride. Trulia faces stiff competition, and based on valuation metrics, its current stock price may not be primed for much future appreciation as of now.
Re/Max still has plenty of room to expand while not facing too much pressure from its competitors. Depending on the IPO price, Re/Max could certainly present a great option for investors to ride the housing market bull trend.
The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.