Is CoStar Group, Inc. (NASDAQ:CSGP) Expensive For A Reason? A Look At Its Intrinsic Value

In the ever-evolving landscape of real estate technology, CoStar Group, Inc. (NASDAQ:CSGP) has emerged as a dominant player, providing comprehensive information, analytics, and online marketplace services to the commercial and residential real estate sectors. As of April 6, 2025, the company's stock price stands at $77.00, raising the question: is CoStar Group expensive for a reason, or is it overvalued? Let's delve into the intrinsic value of CoStar Group to determine whether its current stock price is justified.



Financial Performance and Growth

CoStar Group's financial performance in recent years has been impressive. For the year ended December 31, 2024, the company reported revenue of $2.74 billion, an 11% increase from the previous year. This growth was driven by strong performance across its various brands, including Apartments.com, which generated $1.07 billion in revenue, and CoStar, which contributed $1.02 billion. The company's net income for the year was $139 million, and its EBITDA and Adjusted EBITDA increased significantly, indicating robust profitability.

The company's third-quarter results for 2024 were particularly noteworthy, with revenue of $693 million, a 11% year-over-year increase. Net income for the quarter was $53 million, a 176% increase from the second quarter of 2024. EBITDA and Adjusted EBITDA for the quarter were $51 million and $76 million, respectively, reflecting strong operating performance.

Valuation Metrics

To assess whether CoStar Group's stock price is justified, we need to examine its valuation metrics. The company's Price-to-Earnings (P/E) ratio is 137.66, which is relatively high compared to industry peers. This suggests that investors are willing to pay a premium for the company's earnings, possibly due to its strong growth prospects and market leadership position.



The company's market capitalization of $32.29 billion is significant, but it is important to consider its growth potential and competitive advantages. CoStar Group's strong revenue growth, high EBITDA and Adjusted EBITDA, and dominant market position in the real estate technology sector support its valuation.

Intrinsic Value Analysis

According to Discounted Cash Flow (DCF) modeling, CoStar Group's intrinsic value is estimated to be $68.06, which is 13.14% lower than its current stock price of $77.00. This suggests that the stock may be overvalued. Additionally, an updated version of Benjamin Graham's Formula from Chapter 11 of "The Intelligent Investor" indicates that the stock is trading above its intrinsic value of $10.32. These valuation metrics suggest that the stock may be overvalued, but it is important to consider the company's growth prospects and competitive advantages.

Competitive Positioning

CoStar Group's competitive positioning is a key factor in its valuation. The company's flagship offering, CoStar, is a leading provider of commercial real estate information and analytics. Its other brands, such as Apartments.com, LoopNet, and Homes.com, have established strong market positions in their respective segments. The company's recent acquisition of OnTheMarket in the UK has further expanded its global footprint and strengthened its competitive position.

Conclusion

In conclusion, CoStar Group's current stock price of $77.00 may be overvalued based on its intrinsic value estimates. However, the company's strong financial performance, growth prospects, and competitive positioning support its valuation. Investors should consider these factors when evaluating whether CoStar Group is expensive for a reason or overvalued. As always, it is important to conduct thorough research and consider multiple valuation metrics before making investment decisions.