Intrinsic value of CoStar Group, Inc. - CSGP

Previous Close

$464.89

  Intrinsic Value

$110.70

stock screener

  Rating & Target

str. sell

-76%

Previous close

$464.89

 
Intrinsic value

$110.70

 
Up/down potential

-76%

 
Rating

str. sell

Our model is not good at valuating stocks of financial companies, such as CSGP.

We calculate the intrinsic value of CSGP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 16.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  24.20
  22.28
  20.55
  19.00
  17.60
  16.34
  15.20
  14.18
  13.26
  12.44
  11.69
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
Revenue, $m
  1,480
  1,810
  2,182
  2,597
  3,054
  3,553
  4,093
  4,674
  5,294
  5,952
  6,648
  7,381
  8,150
  8,956
  9,797
  10,674
  11,587
  12,538
  13,526
  14,553
  15,620
  16,729
  17,882
  19,081
  20,327
  21,623
  22,973
  24,378
  25,842
  27,367
Variable operating expenses, $m
  827
  1,009
  1,215
  1,445
  1,697
  1,973
  2,272
  2,593
  2,936
  3,300
  3,677
  4,082
  4,507
  4,953
  5,418
  5,903
  6,408
  6,934
  7,480
  8,048
  8,639
  9,252
  9,889
  10,552
  11,241
  11,958
  12,705
  13,482
  14,291
  15,135
Fixed operating expenses, $m
  263
  268
  274
  280
  287
  293
  299
  306
  313
  319
  327
  334
  341
  349
  356
  364
  372
  380
  389
  397
  406
  415
  424
  433
  443
  453
  462
  473
  483
  494
Total operating expenses, $m
  1,090
  1,277
  1,489
  1,725
  1,984
  2,266
  2,571
  2,899
  3,249
  3,619
  4,004
  4,416
  4,848
  5,302
  5,774
  6,267
  6,780
  7,314
  7,869
  8,445
  9,045
  9,667
  10,313
  10,985
  11,684
  12,411
  13,167
  13,955
  14,774
  15,629
Operating income, $m
  391
  532
  693
  872
  1,070
  1,287
  1,522
  1,775
  2,045
  2,333
  2,645
  2,965
  3,302
  3,654
  4,023
  4,407
  4,807
  5,224
  5,657
  6,107
  6,576
  7,063
  7,569
  8,095
  8,643
  9,212
  9,805
  10,423
  11,067
  11,739
EBITDA, $m
  450
  603
  776
  969
  1,183
  1,417
  1,670
  1,943
  2,235
  2,545
  2,872
  3,218
  3,581
  3,961
  4,358
  4,772
  5,204
  5,653
  6,120
  6,606
  7,110
  7,635
  8,181
  8,748
  9,338
  9,952
  10,592
  11,258
  11,952
  12,675
Interest expense (income), $m
  0
  0
  4
  8
  13
  19
  25
  31
  38
  46
  54
  63
  72
  82
  92
  102
  113
  125
  137
  150
  163
  176
  190
  205
  220
  236
  252
  269
  287
  306
  325
Earnings before tax, $m
  391
  529
  685
  859
  1,052
  1,262
  1,491
  1,737
  1,999
  2,278
  2,582
  2,893
  3,220
  3,563
  3,920
  4,293
  4,682
  5,087
  5,507
  5,945
  6,400
  6,872
  7,364
  7,875
  8,407
  8,960
  9,536
  10,136
  10,762
  11,414
Tax expense, $m
  106
  143
  185
  232
  284
  341
  402
  469
  540
  615
  697
  781
  869
  962
  1,058
  1,159
  1,264
  1,373
  1,487
  1,605
  1,728
  1,856
  1,988
  2,126
  2,270
  2,419
  2,575
  2,737
  2,906
  3,082
Net income, $m
  285
  386
  500
  627
  768
  921
  1,088
  1,268
  1,459
  1,663
  1,885
  2,112
  2,351
  2,601
  2,862
  3,134
  3,418
  3,713
  4,020
  4,340
  4,672
  5,017
  5,376
  5,749
  6,137
  6,541
  6,961
  7,399
  7,856
  8,332

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  2,937
  3,592
  4,330
  5,153
  6,059
  7,049
  8,121
  9,273
  10,503
  11,809
  13,190
  14,645
  16,171
  17,769
  19,438
  21,178
  22,990
  24,876
  26,837
  28,875
  30,992
  33,193
  35,480
  37,858
  40,331
  42,903
  45,581
  48,369
  51,273
  54,301
Adjusted assets (=assets-cash), $m
  2,937
  3,592
  4,330
  5,153
  6,059
  7,049
  8,121
  9,273
  10,503
  11,809
  13,190
  14,645
  16,171
  17,769
  19,438
  21,178
  22,990
  24,876
  26,837
  28,875
  30,992
  33,193
  35,480
  37,858
  40,331
  42,903
  45,581
  48,369
  51,273
  54,301
Revenue / Adjusted assets
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
Average production assets, $m
  1,150
  1,407
  1,696
  2,018
  2,373
  2,761
  3,180
  3,631
  4,113
  4,625
  5,165
  5,735
  6,333
  6,958
  7,612
  8,294
  9,003
  9,742
  10,510
  11,308
  12,137
  12,999
  13,894
  14,826
  15,794
  16,801
  17,850
  18,942
  20,079
  21,265
Working capital, $m
  -52
  -63
  -76
  -91
  -107
  -124
  -143
  -164
  -185
  -208
  -233
  -258
  -285
  -313
  -343
  -374
  -406
  -439
  -473
  -509
  -547
  -586
  -626
  -668
  -711
  -757
  -804
  -853
  -904
  -958
Total debt, $m
  70
  151
  242
  343
  454
  576
  708
  850
  1,001
  1,162
  1,331
  1,510
  1,698
  1,895
  2,100
  2,314
  2,537
  2,769
  3,010
  3,261
  3,521
  3,792
  4,073
  4,366
  4,670
  4,986
  5,315
  5,658
  6,016
  6,388
Total liabilities, $m
  361
  442
  533
  634
  745
  867
  999
  1,141
  1,292
  1,453
  1,622
  1,801
  1,989
  2,186
  2,391
  2,605
  2,828
  3,060
  3,301
  3,552
  3,812
  4,083
  4,364
  4,657
  4,961
  5,277
  5,606
  5,949
  6,307
  6,679
Total equity, $m
  2,576
  3,150
  3,797
  4,519
  5,314
  6,182
  7,122
  8,132
  9,211
  10,357
  11,568
  12,843
  14,182
  15,583
  17,047
  18,573
  20,163
  21,816
  23,536
  25,323
  27,180
  29,110
  31,116
  33,202
  35,370
  37,626
  39,974
  42,419
  44,967
  47,622
Total liabilities and equity, $m
  2,937
  3,592
  4,330
  5,153
  6,059
  7,049
  8,121
  9,273
  10,503
  11,810
  13,190
  14,644
  16,171
  17,769
  19,438
  21,178
  22,991
  24,876
  26,837
  28,875
  30,992
  33,193
  35,480
  37,859
  40,331
  42,903
  45,580
  48,368
  51,274
  54,301
Debt-to-equity ratio
  0.030
  0.050
  0.060
  0.080
  0.090
  0.090
  0.100
  0.100
  0.110
  0.110
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
Adjusted equity ratio
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877
  0.877

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  285
  386
  500
  627
  768
  921
  1,088
  1,268
  1,459
  1,663
  1,885
  2,112
  2,351
  2,601
  2,862
  3,134
  3,418
  3,713
  4,020
  4,340
  4,672
  5,017
  5,376
  5,749
  6,137
  6,541
  6,961
  7,399
  7,856
  8,332
Depreciation, amort., depletion, $m
  59
  70
  83
  97
  113
  130
  148
  168
  189
  212
  228
  253
  279
  307
  335
  365
  397
  429
  463
  498
  535
  573
  612
  653
  696
  740
  786
  834
  885
  937
Funds from operations, $m
  344
  456
  583
  724
  881
  1,051
  1,237
  1,436
  1,649
  1,875
  2,113
  2,365
  2,630
  2,907
  3,197
  3,499
  3,815
  4,142
  4,483
  4,838
  5,206
  5,590
  5,988
  6,402
  6,833
  7,281
  7,748
  8,234
  8,741
  9,269
Change in working capital, $m
  -10
  -12
  -13
  -15
  -16
  -17
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
Cash from operations, $m
  354
  468
  596
  739
  897
  1,069
  1,256
  1,456
  1,671
  1,898
  2,137
  2,390
  2,657
  2,935
  3,227
  3,530
  3,846
  4,176
  4,518
  4,874
  5,244
  5,628
  6,028
  6,444
  6,876
  7,326
  7,795
  8,283
  8,792
  9,322
Maintenance CAPEX, $m
  -41
  -51
  -62
  -75
  -89
  -105
  -122
  -140
  -160
  -181
  -204
  -228
  -253
  -279
  -307
  -335
  -365
  -397
  -429
  -463
  -498
  -535
  -573
  -612
  -653
  -696
  -740
  -786
  -834
  -885
New CAPEX, $m
  -225
  -256
  -289
  -322
  -355
  -388
  -420
  -451
  -482
  -512
  -541
  -570
  -598
  -626
  -654
  -682
  -710
  -738
  -768
  -798
  -829
  -862
  -896
  -931
  -968
  -1,007
  -1,048
  -1,092
  -1,137
  -1,186
Cash from investing activities, $m
  -266
  -307
  -351
  -397
  -444
  -493
  -542
  -591
  -642
  -693
  -745
  -798
  -851
  -905
  -961
  -1,017
  -1,075
  -1,135
  -1,197
  -1,261
  -1,327
  -1,397
  -1,469
  -1,543
  -1,621
  -1,703
  -1,788
  -1,878
  -1,971
  -2,071
Free cash flow, $m
  89
  161
  245
  342
  453
  577
  714
  865
  1,029
  1,206
  1,392
  1,593
  1,806
  2,031
  2,266
  2,513
  2,771
  3,041
  3,321
  3,613
  3,916
  4,232
  4,560
  4,901
  5,255
  5,623
  6,006
  6,405
  6,820
  7,252
Issuance/(repayment) of debt, $m
  70
  80
  91
  101
  112
  122
  132
  142
  151
  161
  170
  179
  188
  197
  205
  214
  223
  232
  241
  251
  260
  271
  281
  292
  304
  316
  329
  343
  357
  372
Issuance/(repurchase) of shares, $m
  215
  188
  148
  94
  27
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  285
  268
  239
  195
  139
  122
  132
  142
  151
  161
  170
  179
  188
  197
  205
  214
  223
  232
  241
  251
  260
  271
  281
  292
  304
  316
  329
  343
  357
  372
Total cash flow (excl. dividends), $m
  375
  429
  483
  537
  592
  698
  846
  1,007
  1,180
  1,366
  1,562
  1,772
  1,994
  2,227
  2,472
  2,727
  2,994
  3,273
  3,562
  3,863
  4,177
  4,503
  4,841
  5,193
  5,559
  5,940
  6,336
  6,748
  7,177
  7,624
Retained Cash Flow (-), $m
  -500
  -574
  -647
  -721
  -795
  -868
  -940
  -1,010
  -1,079
  -1,146
  -1,211
  -1,275
  -1,339
  -1,401
  -1,464
  -1,526
  -1,589
  -1,654
  -1,720
  -1,787
  -1,857
  -1,930
  -2,006
  -2,085
  -2,169
  -2,256
  -2,348
  -2,445
  -2,547
  -2,655
Prev. year cash balance distribution, $m
  946
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  820
  -145
  -164
  -184
  -204
  -170
  -94
  -3
  101
  221
  351
  497
  655
  826
  1,008
  1,201
  1,405
  1,619
  1,843
  2,076
  2,320
  2,573
  2,835
  3,108
  3,390
  3,684
  3,988
  4,303
  4,630
  4,969
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  786
  -132
  -143
  -151
  -158
  -123
  -63
  -2
  58
  116
  167
  212
  249
  277
  296
  305
  306
  298
  284
  264
  240
  213
  186
  158
  132
  107
  86
  67
  51
  37
Current shareholders' claim on cash, %
  98.2
  96.9
  96.1
  95.7
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6

CoStar Group, Inc. (CoStar) is a provider of information, analytics and online marketplaces to the commercial real estate and related business community through its database of commercial real estate information covering the United States, the United Kingdom, and parts of Canada, Spain, Germany and France. The Company provides online marketplaces for commercial real estate, apartment rentals, lands for sale and businesses for sale. It manages its business geographically in two segments: North America, which includes the United States and Canada, and International, which includes the United Kingdom, Spain, Germany and France. Its suite of information, analytics and online marketplaces is branded and marketed to its customers. Its services are primarily derived from a database of building-specific information and offer customers specialized tools for accessing, analyzing and using its information. It has five brands: CoStar, LoopNet, Apartments.com, BizBuySell and LandsofAmerica.

FINANCIAL RATIOS  of  CoStar Group, Inc. (CSGP)

Valuation Ratios
P/E Ratio 178.4
Price to Sales 18.1
Price to Book 9.2
Price to Tangible Book
Price to Cash Flow 77.3
Price to Free Cash Flow 85.7
Growth Rates
Sales Growth Rate 17.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -45.7%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 18
Current Ratio 0
LT Debt to Equity 18.5%
Total Debt to Equity 20.4%
Interest Coverage 0
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 2.2%
Return On Total Capital 4.4%
Ret/ On T. Cap. - 3 Yr. Avg. 2.4%
Return On Equity 5.3%
Return On Equity - 3 Yr. Avg. 2.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 79.2%
Gross Margin - 3 Yr. Avg. 75.1%
EBITDA Margin 24.7%
EBITDA Margin - 3 Yr. Avg. 20.2%
Operating Margin 17.3%
Oper. Margin - 3 Yr. Avg. 11%
Pre-Tax Margin 16.3%
Pre-Tax Margin - 3 Yr. Avg. 9.7%
Net Profit Margin 10.1%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 38%
Eff/ Tax Rate - 3 Yr. Avg. 91.5%
Payout Ratio 0%

CSGP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSGP stock intrinsic value calculation we used $1192 million for the last fiscal year's total revenue generated by CoStar Group, Inc.. The default revenue input number comes from 0001 income statement of CoStar Group, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CSGP stock valuation model: a) initial revenue growth rate of 24.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for CSGP is calculated based on our internal credit rating of CoStar Group, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of CoStar Group, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CSGP stock the variable cost ratio is equal to 56%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $257 million in the base year in the intrinsic value calculation for CSGP stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for CoStar Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for CoStar Group, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CSGP stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CSGP are equal to 77.7%.

Life of production assets of 22.7 years is the average useful life of capital assets used in CoStar Group, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CSGP is equal to -3.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3021.942 million for CoStar Group, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 36.450 million for CoStar Group, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of CoStar Group, Inc. at the current share price and the inputted number of shares is $16.9 billion.

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