How Should Investors View Zillow After a 10% Drop and Earnings Volatility in 2025?

Ever get the feeling you’re at a crossroads with a stock like Zillow Group, trying to decide if it’s time to buy, sell, or just watch from the sidelines? You’re not alone. Zillow’s price tag has been on a wild ride, and anyone looking at its one-year return of 17.3% might get a bit of FOMO. But rewind just a week, and you’ll see a sharp dip of 10.1%, capping off a 30-day slide of 8.9%. Despite these recent bruises, the stock is still up a whopping 163.0% over the last three years, which is no small feat in today’s volatile market. That kind of long-term growth has attracted investors looking for tech-fueled transformation in the real estate world, especially as the housing market keeps adapting to shifting trends and digital disruption.

But here’s the thing: while growth potential often grabs the headlines, it’s valuation that really drives smart decisions. According to a multi-pronged valuation check, Zillow Group is considered undervalued in just 1 out of 6 measures. That raises questions about whether the current price is as compelling as the recent growth might suggest, especially for anyone hoping to spot the next big opportunity (or avoid a costly misstep).

So how do various valuation methods judge Zillow today? Is there a better approach to making sense of all these numbers? Let’s break down the usual frameworks and then explore a smarter way to piece it all together at the end.

Zillow Group scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Zillow Group Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates the value of a company by projecting its future cash flows and then discounting those amounts back to today’s dollars. The idea is simple: a company is worth the sum of what it’s expected to earn in the future, adjusted for risk and time.

For Zillow Group, analysts estimate that free cash flow for the latest twelve months stands at $261 million. Looking ahead, those cash flows are projected to grow sharply, with analyst estimates reaching $1.07 billion by 2029. It’s important to note that while analyst data typically covers only the next five years, further years are extrapolated to reflect expected long-term trends in the business.

Based on these projections, the DCF model calculates an intrinsic value of $92.57 per share for Zillow Group. This is about 17.4% higher than the current share price, implying the stock is undervalued according to this method.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Zillow Group.

Our Discounted Cash Flow (DCF) analysis suggests Zillow Group is undervalued by 17.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Zillow Group Price vs Sales

The Price-to-Sales (P/S) ratio is often the go-to valuation metric for companies that are either early in their profit journey or experiencing lumpy earnings, which makes traditional measures like Price-to-Earnings less meaningful. The P/S ratio allows investors to focus on the revenue-generating capability of a business, which is a critical foundation for long-term profitability and scaling in fast-changing industries like technology-enabled real estate.

It’s important to recognize that what’s considered a “normal” or “fair” P/S ratio is shaped by growth expectations and risk. High-growth companies with exciting expansion ahead can command lofty multiples, while slower movers or those facing significant headwinds typically trade at a discount. For context, Zillow Group’s current P/S ratio is 7.76x. That is notably higher than the Real Estate industry average of 3.21x and the closest peer average of 3.94x, reflecting optimism about Zillow’s growth prospects.

However, comparing to simple benchmarks is not always enough. This is where Simply Wall St’s proprietary “Fair Ratio” comes in, a data-driven P/S multiple tailored to a company’s future earnings potential, margins, risk profile, sector, and market cap. This fair ratio, set at 4.54x for Zillow, is more robust than a basic peer or industry check because it incorporates not just growth but also factors like volatility and operational scale. When comparing Zillow’s actual 7.76x against the 4.54x Fair Ratio, the stock appears overvalued by this framework.

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 Zillow Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives: a clearer, smarter approach used by investors on Simply Wall St to make sense of all these numbers. A Narrative is your story about a company, connecting how you see its business roadmap and opportunities (or risks) with a financial forecast and a fair value. Instead of being boxed in by a single framework or analyst estimate, Narratives empower you to express your own perspective about Zillow Group’s future revenue, margin, or growth, and then see how those assumptions translate into a share price.

What makes Narratives so powerful is that they link a company’s story to its financial outcomes, refresh automatically as real-world news and earnings updates come in, and help you quickly compare the fair value from your Narrative to Zillow’s current share price, giving clarity on whether it’s time to buy, sell, or wait. All of this is easily accessible on Simply Wall St’s Community page, where millions of investors share and debate their Narratives. For example, one investor might see Zillow’s expanding digital ecosystem and AI-powered features as reason to forecast robust growth and a fair value near $100. Another, more cautious investor may focus on regulatory risks or commission pressure, estimating value below $66. Narratives let you decide and invest with confidence.

Do you think there's more to the story for Zillow 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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