Why Purplebricks Group plc is set to be a millionaire-maker stock

Now I’m not one to get caught up in hype, especially when it comes to the ‘next big thing’. When you get to my age you learn to be more sceptical about pretty much everything you hear or read.

No timewasters please

So when it comes to investing, I’ve often shied away from overhyped growth stocks that have yet to turn an actual profit. Call me boring, but I like to see a track record of profitable growth before handing over my hard-earned cash. Of course, this often means missing out on tomorrow’s big winners. But let’s just say that my fear of losing money is greater than my fear of missing out.

But today I’m making an exception – perhaps the first of many. In case you missed its quirky TV ads, Purplebricks (LSE: PURP) is the UK’s first ‘hybrid’ estate agent, combining the low cost of online operators with the local expertise and personal service that high street agents can offer.

Unlike traditional estate agencies, which normally charge a percentage of the selling price, Purplebricks charges a flat fee of just £849 (including VAT) for a sale anywhere in the UK besides London and surrounding areas, where there is a charge of £1,199. But the fee is paid regardless of whether the property is sold or not, helping to avoid the industry issue of timewasters, and those that are merely ‘testing the water’.

Untold riches

Does this disruptive model work, I hear you ask? Oh yes indeed, it works. In its last set of results for FY2017, the group revealed that it had captured no less than 72% of the UK’s growing online market, recruited 640 Local Property Experts since it was launched in April 2014, and is already the third largest estate agency group in the county. Building on its UK success, Purplebricks moved into the Australian market in August 2016 and the huge $70bn US real estate market in September of this year.

Next week the group publishes its results for the first half of the current financial year (ended 31 October), and I’m expecting it to have increased its dominance of the online market here in the UK, to report further progress in its Australian operations, with hopefully some good news regarding its all-important US rollout. If this transpires, then I wouldn’t be surprised if the share price takes off in the coming weeks and months.

It wouldn’t mean everything is perfect just yet. Purplebricks isn’t forecast to turn a profit until the next financial year. That’s because the company’s fast and furious expansion plans have eaten up a lot of cash. Nevertheless, I can’t help but feel that if the business can make the most of its first mover advantage and be nimble enough to quickly penetrate the highly lucrative US real estate market, then there could be untold riches for investors willing to put their faith in the endearing brand.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.