If you have never heard of eXp World Holdings (NASDAQ:EXPI), you're probably not alone, but this small real estate broker could become a household name (literally). 

eXp is growing like gangbusters, and the reasons behind this growth could allow eXp to continue growing for many years. It's on the verge of breaking out not only domestically but around the world. At these valuations, shareholders could see extreme benefits if they invest before this company gets broader attention. 

A smiling person handing a smiling couple the keys to a house.

Image source: Getty Images.

Best agent incentives in the market

eXp has an unwavering commitment to its agents -- wanting to become the "most agent-centric company on the planet" -- by offering value to agents through compensation and its cloud-based workspace. The primary value for agents comes through its unmatched compensation offerings. The company does not have any franchise fees -- the cost of opening under the eXp name -- and it gives agents 80% of the gross commission income, or GCI, on the first $80,000. They then receive 100% of any remaining GCI. This is uncommon in the real estate industry. For instance, Keller Williams (NYSE:KW), gives agents only 70% of GCI for the first $140,000 of GCI.

Agents receive vast amounts of incentives in stock: Agents could receive up to $1,000 in stock after just their first year, and they could voluntarily receive 5% of their commission in stock at a 10% discount. Agents could even receive up to $16,000 in stock grants if they become premium agents -- called ICON agents. As of Q2 2021, the company also offers a dividend -- albeit a small one -- of $0.04 per share. This small incentive sweetens the pot a little more and encourages agents to become more invested in eXp.

eXp also offers the opportunity to work from a cloud-based platform so that agents never have to work in an office again. Virbela -- a virtual world platform that eXp bought in 2018 -- allows agents to work completely from home. This form of work has been largely successful for eXp: The company earned Glassdoor's 2020 and 2021 "Best Places to Work" Award -- which makes sense considering that 76% of global office workers want to continue working from home post-COVID-19. Virbela offers more than just work-from-home benefits. This virtual office allows agents to connect with other agents across the world, and it helps agents to easily set up shop in new states and countries without having to build offices in the new areas. 

Growing fast

These incentives have allowed for strong agent growth: The number of agents on the platform in Q2 2021 grew 87% from the year-ago quarter, surpassing 58,000 agents, resulting in over 115,000 transactions in Q2. Revenue during the quarter increased more than 180% to $1 billion, which is double the size of Redfin's (NASDAQ:RDFN) $470 million in Q2 2021, and is catching up to Zillow (NASDAQ:Z) (NASDAQ:ZG) -- which reached $1.3 billion in revenue in Q2 2021. 

eXp is also drastically increasing its international presence. The company entered three new countries in the second quarter, and it announced its expansion into Germany in August. This brought eXp's operations to 18 different countries and territories. In addition, the company has plans to operate in Japan by the end of the year.

While its gross margins are not pretty -- at just 8% Q2, compared to Zillow's 50% and Redfin's 28% -- eXp is the only company out of the three to be free-cash-flow positive every quarter for the past five years. Trailing free cash flow came in at $234 million in Q2 2021, while close competitors Redfin, Zillow, and Compass (NYSE:COMP) all reported negative cash flows for their comparable reporting periods. The strongest free cash flow reading among them was Compass, at negative $155 million.

Appealing valuation

eXp is very undervalued, trading at just 2.4 times sales. This beats out Zillow, which trades at 5.7 times sales, and Redfin, which trades at 4.1 times sales. eXp's valuation is only higher than Compass -- which trades at 1 times sales.

There are plenty of risks associated with eXp. Facing some of the biggest real estate companies in the world will always be a major threat for the company. eXp investors also face dilution risk. With so many stock awards for agents, shareholders have been diluted by 48% over the past five years. eXp is taking steps to mitigate this: buying back nearly $89 million dollars of common stock so far in 2021.

While eXp does not have an easy road ahead, its growth and strong cash generation could allow it to continue its strong growth for the foreseeable future. I think it is only a matter of time before eXp rises to prominence, and because of its low valuation despite its performance relative to competitors, you should consider adding eXp to your portfolio so you don't miss out.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.