RE/MAX (RMAX)

Real estate franchise company RE/MAX (NYSE:RMAX) fell short of the markets revenue expectations in Q3 CY2025, with sales falling 6.7% year on year to $73.25 million. On the other hand, the company expects next quarter’s revenue to be around $71.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.37 per share was in line with analysts’ consensus estimates.

Company Overview

Short for Real Estate Maximums, RE/MAX (NYSE:RMAX) operates a real estate franchise network spanning over 100 countries and territories.

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.

RE/MAX’s primary competitors are Realogy Holdings (NYSE:RLGY), Zillow (NASDAQ:ZG), Redfin (NASDAQ:RDFN), eXp World (NASDAQ:EXPI), and private companies Keller Williams Realty and Century 21 Real Estate.

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, RE/MAX’s 2.3% annualized revenue growth over the last five years was weak. This fell short of our benchmarks and is a tough starting point for our analysis.

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. RE/MAX’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 5.8% annually.

We can dig further into the company’s revenue dynamics by analyzing its number of agents, which reached 147,547 in the latest quarter. Over the last two years, RE/MAX’s agents were flat. Because this number is higher than its revenue growth during the same period, we can see the company’s monetization has fallen.

This quarter, RE/MAX missed Wall Street’s estimates and reported a rather uninspiring 6.7% year-on-year revenue decline, generating $73.25 million of revenue. Company management is currently guiding for a 1.3% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to remain flat over the next 12 months. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below average for the sector.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

RE/MAX’s operating margin has been trending up over the last 12 months and averaged 11.3% over the last two years. Its profitability was higher than the broader consumer discretionary sector, showing it did a decent job managing its expenses.

In Q3, RE/MAX generated an operating margin profit margin of 25%, up 5.6 percentage points year on year. This increase was a welcome development, especially since its revenue fell, showing it was more efficient because it scaled down its expenses.

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.

Sadly for RE/MAX, its EPS declined by 7.1% annually over the last five years while its revenue grew by 2.3%. However, its operating margin actually improved during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

In Q3, RE/MAX reported adjusted EPS of $0.37, down from $0.38 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 1.6%. Over the next 12 months, Wall Street expects RE/MAX’s full-year EPS of $1.30 to shrink by 1.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

RE/MAX has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 12.5% over the last two years, slightly better than the broader consumer discretionary sector.

RE/MAX’s free cash flow clocked in at $16.43 million in Q3, equivalent to a 22.4% margin. This result was good as its margin was 1.7 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends are more important.

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).

RE/MAX historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 0.4%, lower than the typical cost of capital (how much it costs to raise money) for consumer discretionary companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, RE/MAX’s ROIC averaged 4.9 percentage point increases over the last few years. This is a good sign, and we hope the company can continue improving.

RE/MAX reported $107.5 million of cash and $462.8 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $94.66 million of EBITDA over the last 12 months, we view RE/MAX’s 3.8× net-debt-to-EBITDA ratio as safe. We also see its $14.66 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

This was a quarter without surprises. Revenue missed slightly, and EPS was in line. Looking ahead, EPS guidance for next quarter also met Wall Street's expectations. The stock remained flat at $8.27 immediately after reporting.

Updated: December 4, 2025 at 10:03 PM EST

Before deciding whether to buy RE/MAX or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

RE/MAX doesn’t pass our quality test. To kick things off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, RE/MAX’s number of agents has disappointed, and its Forecasted free cash flow margin suggests the company will ramp up its investments next year.

RE/MAX’s P/E ratio based on the next 12 months is 6.4x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $9 on the company (compared to the current share price of $8.10).