COSTAR GROUP, INC. (CSGP): what the price requires
At today's price, COSTAR GROUP, INC. (CSGP) is priced for +15.1% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/CSGP
Headline
| Field | Value |
|---|---|
| Ticker | CSGP |
| Company | COSTAR GROUP, INC. |
| Current price | $28.62/sh |
| Composition | CoStar 39% / LoopNet 10% / Other Commercial Real Estate 7% / Residential Real Estate 45% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 4.5% |
| Operating margin (mid-cycle) | 17.7% |
| Margin compression implied | -13.2pp |
| Trailing margin (depressed year) | -3.6% |
| Implied growth | 15.1% |
| Multiple paid | 20x mid-cycle operating income |
The operating-margin requirement is derived from the framework's value band at year 9, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.1% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.9pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.24σ |
| sustained it ~5 years at this level | 44% |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 5.21x | 1 | expensive |
| Earnings | 5.33x | 2 | expensive |
| Relative | 7.71x | 3 | expensive |
| Growth | 0.77x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.5%); the inversion above states its own rate.
Per-Model Detail (n=9)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $43.50 | 0.66x | yes | FCF base $0.5B, growth 21% (input: historical growth), terminal g 4.0%, WACC 8.5%, 6yr projection |
| DCF Exit Multiple | Growth | $37.03 | 0.77x | yes | Exit EV/EBITDA: 209.0x / 211.0x / 213.0x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $3.71 | 7.71x | yes | P/E 44x (blended: static sector reference 20x + trailing (TTM) 478x), scenarios: 35.8x / 44.0x / 52.2x (bear / base = reference held flat / bull), EV/EBITDA 30.8x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $0.65 | 44.03x | yes | BV/sh $19.11, ROE (TTM) 0.3%, ke 9.3% (excluded from median) |
| Two-Stage Excess Return | Asset | $0.33 | 86.73x | yes | 5yr excess ROE then converge to ke=9.3% (excluded from median) |
| Discounted Future Market Cap | Growth | $33.27 | 0.86x | yes | Rev $3.4B, growth 21% (input: historical growth; tapered), Terminal P/S: 2.8x / 3.5x / 4.1x (bear / base = today's held flat / bull, cap 12x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $4.73 | 6.05x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.20B × (1−21%) / WACC 8.5% → EPV (no growth) |
| Residual Income | Asset | $0.23 | 124.43x | yes | BV $19.11 + 5yr PV of (ROE (TTM) 0.3% − Kₑ 9.3%) × BV; BV grows 0.2%/yr (excluded from median) |
| Graham Number | Asset | $5.49 | 5.21x | yes | √(22.5 × EPS $0.07 × BVPS $19.11) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $2.07 | 13.83x | yes | EBITDA $0.06B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $6.21 | 4.61x | yes | FCF $230.5M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $0.84 | 34.07x | yes | SBC-adj FCF $0.02B (FCF $0.23B − SBC $0.21B) capitalized at Kₑ (excluded from median) |
| Ben Graham Formula | Earnings | $0.06 | 477.00x | yes | EPS $0.07 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $0.07 | 408.86x | yes | BV $19.11 × (ROIC 0.0% / WACC 8.5%) (excluded from median) |
| P/Sales Sector | Relative | $12.36 | 2.32x | yes | Revenue $3.41B × sector P/S 1.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $0.76 | 37.66x | yes | EPS $0.07 / required return 9.3% (Rf 4.3% + ERP 5.0%) (excluded from median) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $206.0m |
| Net debt / NOPAT (after-tax) | -0.45x (net cash) |
| Net debt / operating income (pre-tax) | -0.36x (net cash) |
| Interest coverage | 20.5x |
| Share count CAGR (dilution) | 1.2% |
| Burning cash | no |
Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 17.7%); the trailing year was depressed.
Bullet Takeaways
- CoStar runs two businesses inside one company: a highly profitable commercial real estate data franchise sold on auto-renewing subscriptions, and a money-losing residential land-grab built around Homes.com that is consuming the profits the commercial side throws off.
- The defining number is the margin split: in the first quarter of 2026 the commercial segment earned a 34% adjusted margin while the residential segment lost money, so the consolidated profit looks far worse than the core business actually is.
- What to watch is whether the residential bet pays off: residential revenue grew 32% to $425 million, but the segment still runs at a loss, and the company warns its "investments may not produce the expected results."
Bull Case
What traditional valuation models miss about CoStar is that the consolidated income statement describes two businesses fused together, and the bad-looking number is a choice, not a condition. The commercial real estate franchise is one of the best subscription businesses in any industry: customers buy data under "subscription-based license agreements that generally renew automatically," and the standardized platform "creates efficiencies in operations and improves data quality for our customers." That business earned a 34% adjusted margin in the first quarter of 2026. The reason consolidated margins look thin is that CoStar is pouring the commercial profits into building a residential portal, a deliberate investment, not a broken business.
The commercial moat is real and widening. Data businesses compound because the more listings and transactions flow through one standardized system, the more valuable that system becomes and the harder it is for a rival to assemble an equivalent dataset. CoStar has spent decades building that data advantage in commercial real estate, and the result shows in record net new bookings of $308 million for 2025 and full-year adjusted EBITDA up 83%. This is a franchise with pricing power and renewal economics most companies would envy.
The residential bet is the optionality the price is paying for, and it is showing traction. Residential revenue grew 32% to $425 million in the first quarter, with double-digit organic growth across Apartments, Homes and OnTheMarket, and the Matterport and Domain acquisitions extend the platform. If Homes.com becomes a credible number-two residential portal, it taps a market many times the size of commercial, and the commercial profits that fund it today convert into a second growth engine tomorrow. The balance sheet supports the patience, with modest net cash, interest covered more than twenty times, and a $1.5 billion buyback authorization. The bull case is a fortress data franchise funding a large optionality bet from a position of financial strength, with the consolidated numbers understating the quality of the core.
Bear Case
The honest place to start the bear case is the disagreement among the valuation methods, because the conservative ones are probably telling the more honest story. The asset-value methods, the earnings-power methods, and the peer-multiple comparison all say CoStar is richly valued. Only the growth-based method reaches the price. When the static frames are unanimous that a stock is expensive and only the growth view defends it, the market is paying a steep premium for a future that has not arrived, and for CoStar that future is specifically the residential business turning profitable, which it has not.
The residential investment is the crux, and it is an open-ended cash drain with no guaranteed payoff. Homes.com loses money, and the company is candid that its "investments may not produce the expected results," warning that if it cannot "successfully execute our investment strategy, we may experience decreases in our revenue, or revenue growth rate, and operating margins." CoStar is attacking entrenched residential portals with deep consumer habits and large marketing budgets, and the history of challengers in consumer real estate is not encouraging. The company acknowledges its residential success "depends, to some degree, on us providing timely access" to listings and attracting both agents and consumers, a two-sided network that is hard and expensive to build. Every quarter the residential losses continue is a quarter the commercial profits are diverted rather than returned.
The valuation leaves little room for the residential bet to disappoint. The price implies operating profit growing roughly 17.8% a year for five years on the company's through-cycle margins, a pace only about 40% of comparable fast-growers sustained, and that math depends on residential eventually earning a real margin rather than perpetually consuming the core's profits. State the requirement plainly: the price needs Homes.com to work, and if it does not, the commercial franchise alone, excellent as it is, does not justify the multiple, and the price compresses toward where the earnings-power and peer methods land, well below today's level. The balance sheet is sound, so this is not a solvency risk, but it is a capital-allocation risk: the market is funding a multi-year residential war whose outcome is uncertain, and recent bookings softness and trimmed analyst targets suggest patience is wearing.
Valuation
The right way to read CoStar is on its normal margins, not the depressed consolidated ones, because the reported operating margin near breakeven reflects the deliberate residential investment rather than the underlying economics. On the company's through-cycle margins, the price pays about 21 times mid-cycle operating income, implying operating-profit growth of roughly 17.8% a year for five years. Keep that approximate; it is one solve. The implied pace is within what CoStar has delivered, but only about 40% of comparable fast-growers sustained it for five years, and crucially the math assumes the residential business stops being a drag and starts contributing margin.
The methods we use to triangulate point to a single, telling pattern. The asset-value methods, the earnings-power methods, and the peer-multiple comparison all say the price is rich, landing well below today's level. Only the growth-based view reaches the price. That is a durability premium, the market paying for compounding the static frames cannot see, but the composition matters: a large part of that premium is the residential optionality, which is unproven, rather than the commercial moat, which is real. The conservative methods are honest about the commercial franchise as it stands today; the growth method is crediting a residential outcome that has not happened.
Solvency is comfortable and gives CoStar room to keep funding the bet. The company holds modest net cash, interest is covered more than twenty times, and it generates real free cash flow from the commercial side, with a $1.5 billion buyback authorization signaling confidence. The downside is bounded by the commercial data franchise, which retains substantial standalone value even if residential never works. What the valuation rests on is the residential bet: whether Homes.com earns a return on the years of investment, or whether the commercial profits keep funding a portal war without a clear finish. The premium the price pays is, in effect, the market's bet that the second engine ignites.
Catalysts
The defining catalyst is residential profitability. Residential revenue grew 32% to $425 million in the first quarter of 2026, with double-digit organic growth, but the segment still ran at an adjusted loss. The single most important thing to watch is the trajectory of the residential margin: evidence that Homes.com is approaching breakeven would validate the multi-year investment and the premium multiple, while continued open-ended losses would intensify pressure on capital allocation. The Matterport and Domain acquisitions are part of that build and their integration is worth tracking.
The commercial engine is the second catalyst, and it is the reliable one. Record net new bookings of $308 million in 2025 and a 34% commercial adjusted margin in the first quarter show the core compounding. Any softness in commercial bookings, which analysts flagged around the fourth quarter, is the bigger near-term risk to the story, because the commercial profits are what fund everything else.
Capital allocation frames the rest. CoStar authorized a $1.5 billion buyback, which both returns cash and signals management's view that the stock is undervalued relative to the eventual two-engine business. Analyst sentiment is a cautious Buy, with targets that were trimmed on bookings softness and mid-term outlook concerns, and a recent downgrade lowering one major bank's target. The next earnings print is the test of whether residential losses are narrowing on schedule and whether commercial bookings have stabilized.
Peer Cohorts (Per Segment, With Filing Citations)
Commercial Real Estate (reported)
- CBRE (CBRE GROUP, INC.)
- (no filing in the citation store)
- JLL (Jones Lang LaSalle Incorporated)
- (no filing in the citation store)
- CWK (CUSHMAN & WAKEFIELD LTD.)
- (no filing in the citation store)
- CIGI (Colliers International Group Inc.)
- (no filing in the citation store)
- FSV (FirstService Corporation)
- (no filing in the citation store)
- MSCI (MSCI INC.)
- (no filing in the citation store)
- SPGI (S&P Global Inc.)
- (no filing in the citation store)
Residential Real Estate (reported)
- ZG (ZILLOW GROUP, INC.)
- (no filing in the citation store)
- OPEN (Opendoor Technologies Inc.)
- (no filing in the citation store)
- BEKE (KE Holdings Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
CSGP FY2025 10-K, accession 0001057352-26-000020 · CoStar Q1 2026 results · CoStar FY2025 results · CoStar buyback announcement, 2026 · CSGP solvency, latest filings · CoStar acquisitions, 2026 · CoStar FY2025 and Q1 2026 results · analyst notes, 2026