Realogy (RLGY) is the world’s largest franchisor of residential real estate brokerages, with leading brands including Corcoran, Century 21, and Coldwell Banker, explains Scott Chan, contributing editor to Investing Daily's The Complete Investor.

Franchisees pay fees for the right to use a Realogy trademark; Realogy also owns and operates brokerages directly, earning commissions.

While Realogy has a global presence, the U.S. housing market accounts for the lion’s share of revenues. From 2014 to 2016, Realogy’s share of U.S. transaction volume dropped from 16.7% to 15.7%. In 2017 it moved back up a bit to 15.9%.

However, that came with a 1.7 percentage-point year-over-year increase in commissions paid to agents as competition for top agents intensified. Still, steady growth in the U.S. housing market pushed Realogy’s 2017 revenue to a record high above $6.1 billion.

At the end of last year long time Realogy CEO Richard Smith retired and was replaced by Ryan Schneider, the company’s first leadership change in 21 years.

Schneider immediately appointed new leaders at Realogy’s various subsidiaries and on his first earnings call as CEO pledged to move faster in implementing data-driven initiatives to improve operations.

Given its size and long history, Realogy likely has access to a volume of data unmatched in the industry. So Schneider’s emphasis on making better use of data seems like a wise strategy.

Realogy gave a cautious first-quarter outlook, forecasting a 50% drop in EBITDA compared to the first quarter of 2017. However, the company also predicted that the subsequent three quarters would equal or beat last year’s comparable periods.

We will watch closely to see if Schneider’s vision bears fruit in this highly competitive industry. Realogy has a market cap of $3.6 billion and trades at a P/B ratio of 1.4. The quarterly dividend is $0.09 a share, equal to 1.3% at the current share price. We are adding the stock to our small cap model portfolio.

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