CoStar Group, Inc.’s (NASDAQ:CSGP) most recent earnings update in December 2018 signalled that the company benefited from a large tailwind, leading to a high double-digit earnings growth of 94%. Investors may find it useful to understand how market analysts view CoStar Group’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Market analysts’ consensus outlook for the coming year seems optimistic, with earnings expanding by a robust 20%. This growth seems to continue into the following year with rates reaching double digit 50% compared to today’s earnings, and finally hitting US$433m by 2022.
Although it’s helpful to be aware of the growth rate year by year relative to today’s figure, it may be more insightful evaluating the rate at which the earnings are rising or falling every year, on average. The advantage of this approach is that it ignores near term flucuations and accounts for the overarching direction of CoStar Group’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve inserted a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 19%. This means that, we can expect CoStar Group will grow its earnings by 19% every year for the next couple of years.
For CoStar Group, I’ve put together three pertinent factors you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is CSGP worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CSGP is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CSGP? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.