CoStar Group, Inc.
) has seen consensus estimates fall meaningfully lower for both
2013 and 2014 following a rare earnings miss on February 27. It is
a Zacks Rank #5 (Strong Sell).
Despite the negative earnings momentum, shares still trade at a
premium on a forward price to earnings and price to cash flow
basis. This doesn't bode well for shares over the next several
CoStar Group provides information, analytics and marketing services
for the commercial real estate market.
Q4 Miss, Falling Estimates
CoStar reported fourth quarter results on February 27. Adjusted
earnings per share came in at 33 cents, missing the Zacks Consensus
Estimate by 2 cents. Revenue rose 51% to $100.1 million, but this
was driven in large part by an acquisition.
Following the Q4 earnings miss, analysts revised their estimates
meaningfully lower for both 2013 and 2014. This sent the stock to a
Zacks Rank #5 (Strong Sell). The 2013 Zacks Consensus Estimate is
now $1.71, down from $1.80 thirty days ago. And the 2014 consensus
is now $2.28, down from $2.57. You can see this sharp decline in
the company's 'Price & Consensus' chart:
Despite the negative earnings momentum, shares of CoStar still
trade at a frothy 56x 12-month forward earnings, which is a
significant premium to the industry median of 17x. Its price to
cash flow ratio of 63 is also above its the peer group median of
CoStar Group also carries a long-term 'Underperform' Zacks
The Bottom Line
With negative earnings momentum and premium valuation, investors
may want to consider avoiding CoStar Group for now. However, there
are other stocks within the IT Services industry that investors
might want to check out.
), for instance, carries a Zacks Rank of 1 (Strong Buy), and
) has a Zacks Rank of 2 (Buy).
Todd Bunton is the Growth & Income Stock Strategist for
and Editor of the
Income Plus Investor service
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