Volatile markets are full of buying opportunities. The stock market as a whole, measured by the broad S&P500 index, is down about 17% so far this year, but high-growth tech stocks are down even more drastically. This means that there are a lot of stocks on sale right now that have a lot of potential.

A real estate stock that I have followed closely is eXp World Holdings (EXPI -3.43%), the first and only 100% virtual brokerage. It’s changing the real estate brokerage game by offering a new – and in many ways, better – way for agents to do business.

Thanks to the tech selloff earlier this year and growing concern over the housing market’s start-up, the stock has fallen more than 80% from its 2021 high after being crushed along with many others growth and technology stocks. With such a steep decline, let’s take a closer look at whether this company is a buy.

Revolutionizing the brokerage business

Unlike established real estate brokers like Remax, Keller Williams Realty or Coldwell Banker Real Estate, eXp World Holdings does not have physical offices. It works 100% remotely and in the cloud. Everything from meetings and training to marketing resources and closing procedures is handled online. But that’s not the only thing that makes the company different.

It passes on the savings from no rent or office overhead to its agents. Most brokerages offer agents a 60/40 split on each trade – the brokerage receives 40% of the sales commission. In contrast, eXp offers a much more generous 80/20 split.

The company also offers tons of incentives, including a revenue-sharing structure that allows its agents to earn a percentage of the sales made by the agents they recruit. It also has caps on how much agents must pay the brokerage after a certain sales volume is reached, ultimately allowing agents to earn more the more trades they complete.

This unique structure is precisely why the company is currently the fastest growing brokerage in the world, with over 80,000 agents in its network on six continents. Since 2016, the number of agents in its network has grown at an annualized rate of 55%, and it is still expanding.

Can eXp continue to grow?

The company’s business model is clearly attractive to agents, but can it continue to grow? I think there are many reasons why this can happen. Its incentive-based recruiting program motivates agents to stick with eXp for the long term, as it provides them with additional passive income.

Agents also receive stock-based incentives instead of monetary bonuses for reaching certain milestones, which further motivates them to stay as shareholders. The company expands into new countries. Its latest market is Chile, and this month it closed its acquisition of Zoocasa Realty, a Canada-based real estate search and brokerage portal, to help improve its sources of leads for its agents. He also actively invests in the metaverse.

In the first quarter, the company posted record revenue of $1 billion, with gross profit up 56% year-over-year to $83.5 million and net profit up $86. % to reach $8.9 million. Additionally, the company has no debt and $130 million in cash and cash equivalents on the books. Add to that its operating cash flow of $202 million and it is well positioned to fund future growth.

So what’s the downside?

Stock dilution initially concerned me and was the main reason I waited to buy stocks. As eXp regularly issues more equity to its agents, this could dilute the value of previously outstanding shares. Since 2015, its number of shares has increased by 53%.

But eXp has a dedicated share buyback program to keep its equity ratios balanced. In the first quarter, it increased its share buyback program to $500 million. At present, he appears well equipped to keep the program going, although there’s no guarantee this won’t become an issue in the future if the brokerage isn’t able to keep pace with share buybacks.

The business started just after the Great Recession, when real estate was starting to make a comeback. In the last two years in particular, the housing market has been on fire and a record number of real estate agents have been licensed in 2021. But the real estate market seems to be cooling down and the volume of transactions is already down.

A declining real estate market is not good for eXp’s business, but given its financial situation, it is not a major cause for concern. Its price-to-earnings ratio is around 24, which is significantly higher than that of its real estate brokerage peers, but one of the lowest P/E ratios the company has had since its IPO. While short-term headwinds may slow the growth of the company, I don’t think they’ll be enough to drag it down long-term, which is why I think it’s a great buy today. today.