eXp World (EXPI)

Real estate technology company eXp World (NASDAQ:EXPI) fell short of the market’s revenue expectations in Q1 CY2025 as sales only rose 1.3% year on year to $954.9 million. Its GAAP loss of $0.07 per share was significantly below analysts’ consensus estimates.

Company Overview

Founded in 2009, eXp World (NASDAQ:EXPI) is a real estate company known for its virtual, cloud-based approach to real estate brokerage.

Technology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.

eXp World's primary competitors include Realogy Holdings (NYSE:RLGY), Zillow (NASDAQ:ZG), Redfin (NASDAQ:RDFN), and Compass (NYSE:COMP).

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, eXp World’s 33.1% annualized revenue growth over the last five years was incredible. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. eXp World’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 1.6% over the last two years was well below its five-year trend.

This quarter, eXp World’s revenue grew by 1.3% year on year to $954.9 million, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.1% over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.

eXp World’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same. The company broke even over the last two years, inadequate for a consumer discretionary business. Its large expense base and inefficient cost structure were the main culprits behind this performance.

This quarter, eXp World generated a negative 1.1% operating margin. The company's consistent lack of profits raise a flag.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

eXp World’s earnings losses deepened over the last five years as its EPS dropped 15.4% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. Consumer Discretionary companies are particularly exposed to this, and if the tide turns unexpectedly, eXp World’s low margin of safety could leave its stock price susceptible to large downswings.

In Q1, eXp World reported EPS at negative $0.07, up from negative $0.10 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast eXp World’s full-year EPS of negative $0.11 will reach break even.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

eXp World has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.1%, lousy for a consumer discretionary business.

eXp World’s free cash flow clocked in at $36.84 million in Q1, equivalent to a 3.9% margin. The company’s cash profitability regressed as it was 2.4 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

eXp World’s five-year average ROIC was negative 14.7%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

eXp World is a well-capitalized company with $115.7 million of cash and $67.35 million of debt on its balance sheet. This $48.31 million net cash position is 3.6% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We struggled to find many positives in these results as its revenue, EPS, and EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 2% to $8.50 immediately following the results.

Updated: May 22, 2025 at 10:56 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in eXp World.

We cheer for all companies serving everyday consumers, but in the case of eXp World, we’ll be cheering from the sidelines. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its relatively low ROIC suggests management has struggled to find compelling investment opportunities. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its operating margins reveal poor profitability compared to other consumer discretionary companies.

eXp World’s P/E ratio based on the next 12 months is 17.6x. This multiple tells us a lot of good news is priced in - we think there are better investment opportunities out there.

Wall Street analysts have a consensus one-year price target of $10 on the company (compared to the current share price of $7.70).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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