Is Zillow a Growth Opportunity After Shares Slide 12% This Month?

We have all wondered at one point or another, "Is Zillow Group still a worthwhile bet, or is the ship sailing?" If you are weighing what to do with Zillow stock at $74.39, you are not alone. After a stellar three-year runup of 154.2%, and a respectable 22.0% gain over the past year, recent weeks have been bumpier. Shares are down 3.6% in the last week and have slipped 12.3% over the past month. Yet, even with this volatility, year-to-date returns are still positive at 6.2%, reminding us that this stock has pockets of resilience.

Some investors see opportunity in these dips, especially as homebuying trends and tech-driven real estate transactions return to headlines. Others worry that a five-year decline of 28.9% could signal deeper risks or that the stock’s strong bounce off pandemic-era lows may already be priced in. And when it comes to valuation, things get a bit more complicated. Right now, Zillow Group has a valuation score of 1 out of 6 by our checks, suggesting it is only undervalued by one measure, while other metrics hint at a pricier picture.

If you are confused by these mixed signals, you are not alone. Next, we will break down how these six valuation methods apply to Zillow Group and suggest a smarter way to make sense of whether the stock is truly undervalued, coming up at the end of the article.

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

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today's dollars. For Zillow Group, this means looking at how much cash the business is likely to generate, then accounting for the time value of money to determine what those future cash flows are worth now.

Currently, Zillow Group is generating $261 million in free cash flow. Analysts forecast meaningful growth, with free cash flow expected to rise each year and reach approximately $1.07 billion by the end of 2029. It is important to note that while analyst estimates generally cover the next five years, longer-term projections after that are extrapolated using reasonable growth assumptions.

Using this 2 Stage Free Cash Flow to Equity approach, the resulting intrinsic value estimate is $91.83 per share. With shares recently trading at $74.39, the DCF analysis suggests the stock is 19.0% undervalued compared to its calculated fair value.

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 19.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Zillow Group Price vs Sales (P/S) Multiple

The Price-to-Sales (P/S) ratio is a widely used metric for valuing companies like Zillow Group, which are not currently profitable on a net income basis. P/S is especially helpful for high-growth technology and platform businesses in real estate, since sales (revenue) are less affected by accounting choices than earnings, and investors often believe sales growth will ultimately drive future profits.

It is important to remember that what counts as a “normal” or “fair” P/S ratio can vary based on the company’s sales growth rate, profit margins, competitive position, and risk level. Fast-growing companies or those with superior margins usually command a higher P/S, while risky or slower-growth businesses trade at a discount.

Right now, Zillow Group trades at a P/S multiple of 7.55x. This is significantly above the real estate industry average of 2.91x and also higher than the peer group average of 3.90x. However, Simply Wall St’s proprietary Fair Ratio for Zillow Group is 4.22x. This metric blends in the company’s growth, margins, risk profile, industry trends, and its market capitalization to provide a more holistic valuation target.

The Fair Ratio offers a better benchmark than a straightforward peer or sector comparison because it is personalized to Zillow Group’s underlying strengths and weaknesses. In this case, the company’s actual P/S ratio exceeds its Fair Ratio, suggesting that the stock’s valuation is on the expensive side based on these fundamentals.

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 us introduce you to Narratives. A Narrative is your personal story about a company, combining your expectations for Zillow Group’s future growth, earnings, and margins with your view of what the business is really worth. Instead of just focusing on ratios or analyst price targets, Narratives help you link the bigger picture, such as the company’s strategy, industry shifts, risks, and breakthroughs, to a dynamic financial forecast and an up-to-date fair value.

On Simply Wall St’s Community page, millions of investors use Narratives as an intuitive tool to compare their conviction with others and make smarter buy or sell decisions by measuring Fair Value versus the current Price. Narratives are updated automatically as the facts change, so your outlook adjusts when new earnings, news, or company developments emerge.

For example, right now some investors believe digital innovation, AI-powered features, and premium partnerships will support Zillow Group’s ambitious growth targets, which leads them to set fair values as high as $100 per share. Others are more cautious, weighing regulatory risks and competition, and arrive at fair values closer to $66. Both views are valid. What matters is aligning your actions to your own Narrative.

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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