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In a 2022 interview Todd Combs – a former Berkshire Hathaway manager – set out Warren Buffett’s three criteria for finding stocks to buy:
- A price-to-earnings (P/E) ratio below 15.
- A 90% chance of making more money five years in the future.
- A 50% chance of growing at 7% a year.
Rightmove (LSE:RMV) – one of the UK’s few tech stocks – has fallen 44.72% in the last 12 months. Does it fit the bill at today’s prices?
P/E ratio
Rightmove reported underlying earnings per share (EPS) of 29.1p in 2025. Based on the current share price, that implies a P/E ratio of 14.47. Of course, a big part of that is due to the stock coming down a lot. In fact, it’s trading at an unusually low multiple right now.
The UK firm however, is expecting EPS in 2026 to be at least 5% higher. So the P/E ratio isn’t just the result of unusually high earnings distorting the picture.
So far, so good. Rightmove shares clearly trade at a P/E multiple below 15 whether investors look at the most recent EPS figures or the next ones.
The harder job is predicting what earnings will be going forward. And that’s where things start to look a bit less clear.
2030 earnings
Does Rightmove have a 90% chance of making more money five years from now? Analysts seem to think it does.
Analysts think the firm will manage 39p in earnings per share by 2029. That’s well above the 29p it managed in 2025. It’s also significantly higher than the 31p expected in 2026. So things also look pretty good in terms of Buffett’s second condition.
Importantly however, 39p per share in 2029 doesn’t imply a 7% annual growth rate. It’s around 6.1%.
Buffett’s reported criteria only states a 50% chance of 7% growth, so it might not be out of the question. But this is where things need a closer look.
Artificial intelligence
The reason the stock’s down is artificial intelligence (AI). Investors are wary about two things, the first of which is competition.
Rightmove’s strength is that it has the most buyers and sellers. That provides value for both sides – buyers know where to look and sellers know where to advertise.
The concern is that an AI agent might be able to just find house listings from estate agent websites. And I don’t think that’s out of the question.
The other issue is that the firm – potentially to fend off this threat – is investing in its own AI capabilities. That might be the right move(!) but it’s going to weigh on profits.
Management has guided that EPS growth is set to be between 3% and 5% for the next few years. And that’s why the stock’s crashed in the last few months.
Is this the time to buy?
Rightmove expects these returns to generate profit growth of around 12% a year from 2030. If that happens, shareholders are in business.
The risk however, is that AI investments turn into an ongoing expense. That’s what investors need to try and weigh up.
In terms of Buffett’s reported criteria, I think it’s a really close-run thing. But it’s definitely worth closer investigation.
Stephen Wright owns shares in Berkshire Hathaway.
