Why Real Matters Stock Has Been Pummeled in 2021

Real Matters (TSX:REAL) stock has taken a nosedive in the last year. So, what’s caused it to drop on the TSX today, and what should you do?

| More on:

Real Matters (TSX:REAL) was the stock to beat in 2020, coming on the market at exactly the right time. Real Matters stock soared but has now become one of the most oversold stocks on the TSX today. Let’s look at what’s been happening with this stock and what Motley Fool investors should do now.

What happened?

The decline in Real Matters stock comes from a variety of factors. First, there was the market pullback. The TSX continues to fall with worries of inflation, and add to that worries about the housing market. This goes for the United States as well, as inflation climbs. Real Matters, a tech stock that provides mortgage lending and insurance industries its software, therefore falls into this worrisome category. Should mortgages and inflation hit economies hard, there could be a serious decline in earnings.

In fact, there already has been. Real Matters stock saw minor growth in some areas and a decline in others. For U.S. appraisal services, there was an increase of 17.5% year over year, but a decline of 28.8% year over year in the U.S. Title sector. However, consolidated adjusted EBITDA increased 30.5% for the third quarter. Consolidated revenue, therefore, increased 9.6% year over year and, in fact, posted record-breaking revenue and net revenue in the U.S. and Canadian appraisal segments. The problem was the U.S. Title segment, which severely weighed on Real Matters stock and sent shares shrinking. Despite this, management bought back 4.4 million shares and “remain confident in our long-term growth trajectory … [to] achieve our Fiscal 2025 targets.”

So what?

The last quarter could have been worse, but it certainly could have been better. And that’s how analysts felt. While there’s a lot of “confidence” being pushed around, analysts aren’t so sure. Shares fell 12.9% after the third-quarter results. Analysts therefore lowered ratings from “outperform” to “sector perform,” shrinking the potential upside for Real Matters stock.

Analysts believe the shift towards potential “Tier 1/Tier 2 title win” created the drop in net revenue. With that diversified revenue gone, analysts expect the next quarter and into next year to be impacted as well. This will likely continue to drive share prices lower in the near term, though, long term, it’s harder to gauge. Even after stabilization from this lack of diversity in its portfolio, the new launch isn’t guaranteed. So, Motley Fool investors will have to wait and see what happens on the TSX today.

Now what?

Does that mean you shouldn’t buy? Or should you even be selling? In short, the answer is no on both counts. Real Matters stock continues to dig deeper into oversold territory. Sector perform isn’t bad, and it remains a buy recommendation for many analysts if only they can hold onto the stock for the long term. It trades at a significant discount, with a P/E of 18.06 and EV/EBITDA of 10.64. So, it’s definitely not as overpriced as it was. Shares are now down 65% from where they were at all-time highs. Those looking to get in now and hopefully see shares double to that range again would do well to buy today.

However, if you’re not a risk taker, Real Matter stock may not be for you. There are a lot of question marks with this stock. While long term the housing market will eventually rebound, if Motley Fool investors need cash in the next few years, I wouldn’t recommend the stock — even at these valuable prices.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. 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, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Real Matters Inc.

More on Tech Stocks

chart reflected in eyeglass lenses
Tech Stocks

Top Canadian AI Stocks to Watch in 2025

Celestica (TSX:CLS) stock and another Canadian AI stock are worth watching closely this holiday season.

Read more »

Nvidia Voyager Headquarters
Tech Stocks

Why Nvidia Stock Rallied (Again) on Tuesday

The chipmaker is expected to report earnings this evening.

Read more »

hand stacking money coins
Tech Stocks

3 Growth Stocks That Are Screaming Buys in November

The market might be soaring, but there are still lots of deals to be had. Here are three discounted stocks…

Read more »

Rocket lift off through the clouds
Tech Stocks

Why I’d Buy Constellation Software Stock, Even at Today’s Prices

Despite trading at a relatively frothy multiple, Constellation Software (TSX:CSU) stock still looks like a buy right now.

Read more »

profit rises over time
Tech Stocks

2 Reasons to Buy Kinaxis Stock Like There’s No Tomorrow

Solid revenue growth, improving profitability, and its focus on AI-powered supply chain solutions make Kinaxis stock really attractive to buy…

Read more »

Muscles Drawn On Black board
Tech Stocks

3 No-Brainer Tech Stocks to Buy Right Now for Less Than $500

If you have a bit of cash you're looking to set aside, these are the easiest tech stocks for some…

Read more »

how to save money
Tech Stocks

3 Reasons to Buy Shopify Stock Like There’s No Tomorrow

Here's why Shopify (TSX:SHOP) stock certainly looks like a buy for long-term growth investors looking for a top TSX stock.

Read more »

A child pretends to blast off into space.
Tech Stocks

2 Compelling Reasons to Snap Up Constellation Software Stock Now

Here's why I think Constellation Software (TSX:CSU) is a top-tier growth stock to own for the long-term right now.

Read more »