Can CoStar’s Strong Gains Continue After Second Quarter Revenue Beat?

If you are weighing your next move with CoStar Group stock, you're not alone. Over the past few months, both casual investors and seasoned analysts have been following its trajectory closely, wondering if the solid gains can keep rolling or if this is the time to get cautious. CoStar Group has been on a solid run lately, up more than 23% in the last 90 days and almost 29% year-to-date. The 1-year total return clocks in at over 18%, which is certainly nothing to sneeze at, especially in the current market where tech-adjacent real estate data players are drawing renewed interest. The shorter-term returns highlight a touch of volatility, but for the most part, it has been a confidently upward trend.

What’s been driving these moves? A combination of robust revenue growth, up 11.6% annually, and even more impressive net income growth, soaring over 44% year-on-year. That has caught the attention of analysts, who currently set a price target roughly 6% above where the stock trades today. Recent real estate sector momentum and optimism around data-driven platforms have played their part, helping prop up sentiment and risk appetite for names like CoStar.

But here is where it gets interesting. Despite all of that growth and positive headlines, CoStar Group’s valuation score is currently sitting at 0 out of 6, meaning it is not considered undervalued on any of the core checks used by traditional models. So, does this mean you are looking at a frothy stock, or is there more to the story? Let’s break down how typical valuation approaches measure up here and add some context on a more nuanced way to look at value by the end of this article.

CoStar Group delivered 18.5% returns over the last year. See how this stacks up to the rest of the Real Estate industry.

Approach 1: CoStar Group Cash Flows

The Discounted Cash Flow (DCF) model is a classic approach for estimating what a business is really worth. It is based on the idea of adding up all its expected future cash flows and then discounting those back to today’s dollars. This lets investors see whether a stock price reflects its underlying value or the hype of the moment.

For CoStar Group, the latest twelve months of free cash flow are approximately $4.3 million. Looking ahead, analysts project free cash flow to grow substantially, reaching more than $1.6 billion by 2035. Each year along the way shows significant increases, with $587.5 million forecast for 2026, and momentum building through the end of the decade and beyond.

When all those projected cash flows are discounted back using the 2-Stage Free Cash Flow to Equity model, the fair intrinsic value per share is calculated at $53.05. However, compared to the current share price, this suggests the stock is 72.0% overvalued on a cash flow basis. In other words, the market is pricing in more growth or optimism than these models support at this time.

Result: OVERVALUED

Our DCF analysis suggests CoStar Group may be overvalued by 72.0%. Find undervalued stocks based on DCF analysis or create your own screener to find better value opportunities.

Approach 2: CoStar Group Price vs Sales

When it comes to evaluating fast-growing, profitable companies like CoStar Group, the Price-to-Sales (P/S) ratio is often the preferred multiple. This metric is particularly useful for firms with strong top-line momentum because it gives investors a sense of what the market is willing to pay for each dollar of revenue. This is an important consideration for growth-oriented stocks in the tech-enabled real estate sector.

Generally, the more investors anticipate robust sales growth and lower risk, the higher the P/S multiple they are willing to tolerate. However, extremely lofty ratios can sometimes signal that the market is getting ahead of itself, so it is helpful to compare against industry norms and peers.

Currently, CoStar Group trades at a P/S ratio of 13.26x, which is significantly higher than both the real estate industry average of 3.08x and its peer group’s 2.98x. Meanwhile, Simply Wall St’s proprietary Fair Ratio for CoStar Group, a blend that considers growth, margins, and other risk factors, comes in much lower at 5.17x. Since the current P/S is more than double the Fair Ratio, this suggests that the stock is pricing in a high level of optimism and could be considered overvalued at current levels based on its sales multiple.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your CoStar Group Narrative

Moving beyond simple ratios and price targets, Narratives offer a smarter, more dynamic way to make investment decisions by connecting the story you believe about a company, like CoStar Group, directly to a financial forecast and an estimate of fair value.

Think of a Narrative as your personalized lens. It enables you to combine what you see happening in the business, such as user growth, product innovation, or market risks, with your assumptions about future revenues, earnings, and margins, all in a format that is easy to update as the facts change.

Within the Simply Wall St community, millions of investors use Narratives to check if the current share price is above or below what they believe is “fair” for the company and to quickly spot when new data or news should prompt a reassessment.

Narratives are always evolving. Fair value calculations update automatically whenever key inputs change, helping you stay in sync with the latest developments for CoStar Group without the need for spreadsheets or manual tracking.

For example, one Narrative uses bullish forecasts for earnings and market expansion, resulting in a high fair value near $107 per share. Another, more cautious Narrative based on modest growth lands closer to $70, showing how your outlook shapes your investment strategy.

Do you think there's more to the story for CoStar Group? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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