CoStar Group’s Fiscal 2023 Outlook

• CoStar Group, Inc. (NASDAQ:CSGP) is expected to report a 33.33% decline in EPS but a 9% growth in revenue for the fourth quarter.
• The company's high valuation is evident with a P/E ratio of 171.79 and a price-to-sales ratio of 11.38, indicating strong investor confidence.
• CoStar maintains a conservative capital structure, with a low debt-to-equity ratio of 0.15 and a current ratio of 9.63, showcasing its financial stability.

CoStar Group, Inc. (NASDAQ:CSGP) is a leading provider of commercial real estate information, analytics, and online marketplaces. The company operates well-known platforms such as Apartments.com, LoopNet, and Homes.com, which contribute significantly to its revenue. As a major player in the real estate data industry, CoStar competes with firms like Zillow and Redfin.

On February 18, 2025, CoStar is set to release its fourth-quarter earnings. Analysts expect earnings per share (EPS) to be $0.22, a 33.33% decline from the previous year. Despite this drop, the company anticipates revenues between $693 million and $703 million, marking a 9% growth at the midpoint. The Zacks Consensus Estimate aligns with these projections, suggesting stable analyst expectations.

CoStar's financial metrics reveal a high valuation, with a price-to-earnings (P/E) ratio of 171.79. This indicates that investors are paying a premium for the company's earnings. The price-to-sales ratio of 11.38 shows that investors are willing to pay over 11 times the company's sales per share. These figures suggest strong investor confidence in CoStar's future growth prospects.

The company's enterprise value to sales ratio is 9.95, reflecting its total valuation compared to sales. Additionally, the enterprise value to operating cash flow ratio stands at 59.88, indicating the cost investors are willing to pay for each dollar of cash flow from operations. CoStar's earnings yield is 0.58%, providing insight into the return on investment.

CoStar maintains a conservative capital structure with a low debt-to-equity ratio of 0.15. This suggests limited reliance on debt financing. The company's current ratio of 9.63 indicates a strong ability to cover short-term liabilities with short-term assets, highlighting its financial stability.

Costar Group (NASDAQ:CSGP) reported Q3 earnings with an EPS of $0.30 and revenues of $625 million, reflecting a 12% increase year-over-year, aligning with market expectations. However, the company's shares saw a decline of over 8% in pre-market today due to its guidance not meeting anticipated numbers.

For Q4/23, Costar Group predicts an EPS between $0.31-$0.32, while market estimates stand at $0.35. The company also forecasts Q4 revenues to be between $630-$635M, whereas market consensus is at $644.5M.

For the entire year, Costar Group's anticipated EPS is between $1.21-$1.22, against the market expectation of $1.24. The company expects its annual revenues to lie between $2.445-$2.45 billion, slightly short of the market's prediction of $2.461B.

RBC Capital analysts provided their outlook on CoStar Group (NASDAQ:CSGP) ahead of the company’s Q2/23 earnings, scheduled to be reported on July 25.

The company’s stock rallied around 30% in the second quarter due to a combination of improved fundamentals (CRE weakness offset by triple-digit bookings growth in Apartment.com and LoopNet) and technical (index reclassification and rebalancing).

In Q1, bookings grew 17% year-over-year. The analysts anticipate mid-teens growth in Q2/23, driven by Apartment.com and LoopNet, despite weakness in the CoStar suite. The analysts expect Q2 results and Q3 guidance to align with the Street estimates, and the company to reiterate its full 2023-year guidance. The analysts raised their price target on the stock to $95 from $85 while maintaining their Outperform rating.

RBC Capital analysts provided their outlook on CoStar Group, Inc. (NASDAQ:CSGP) ahead of upcoming Q3 results, and raised their price target to $85 from $80, while maintaining their outperform rating.

The analysts expect a modest Q3/22 beat and guidance raise by the magnitude of the beat and look for any incremental color around 2023 investments. In addition, recent vacancy and rent data imply a continued recovery in Multifamily, and the analysts see the potential for a return to over 20% growth in the mid-term given the large penetration opportunity.

The analysts believe the defensive business model, strong pricing power, and counter-cyclical multifamily business should provide support to the stock in a volatile tape.

Analysts at RBC Capital released their outlook on CoStar Group, Inc. (NASDAQ:CSGP) ahead of the company’s upcoming Q2 earnings report on July 26, expecting a modest beat and guidance reiteration.

According to the analysts, Q2 could largely be a non-event, as investors are focused on longer-term residential strategy/investment as well as the continued Multifamily recovery, salesforce ramp, and sustainability of CoStar (Suite) growth.

CoStar growth is expected to accelerate to around 17% year-over-year in Q2, driven by upgrading customers to the full CoStar product offering and strong bookings growth. Although economic slowdown could potentially weigh on revenue growth, the analysts believe the impact will be delayed by the pricing increases and subscription-based revenue model.

Analysts RBC Capital provided their outlook on CoStar Group, Inc. (NASDAQ:CSGP) ahead of the company’s Q1 results, mentioning that residential strategy/investments, Apartments.com turnaround in H2/22, and hiring and ramping up of the salesforce continue to be key areas of focus.

Accordingly, the Q1/22 results, where the analysts expect a modest beat and the company to reiterate guidance, could potentially be a non-event. The March 9th Sell-side Analyst Day provided insights into the residential strategy; however, monetization won't happen till late 2023/early 2024.

Lastly, the analysts monitor the potential impact to high valuation stocks in the rising rate environment, however, a subscription-based revenue model with strong pricing increases in CoStar and Apartments.com bodes well with concerns around an economic slowdown.