CoStar Group Inc.
) has delivered positive earnings surprises for several quarters
and recently completed the LoopNet acquisition, and now earnings
are expected to grow more than 35% for both 2012 and 2013.
This leading commercial real estate information company became a
Zacks #1 Rank (Strong Buy) stock on May 17, 2012 as earnings
estimates have moved higher due to enthusiasm over commercial
property pricing and improved sales.
What Makes it Attractive?
In the past ten quarters, CoStar beat eight times and matched
twice. It has also surpassed by triple-digit percentages in two of
the last four quarters.
After more than a year from the merger announcement in April 2011,
Costar finally completed the acquisition of LoopNet (leading
marketing commercial real estate) on April 30. The acquisition is a
strategic fit based on its massive cross-selling opportunities, new
product development and penetration into new markets. The
transaction also provides both revenue and cost synergies for the
On April 25, the company reported a first-quarter 2012 profit of 25
cents, surpassing the Zacks Consensus Estimate by 13.64%. The
better-than-expected results were primarily driven by an increased
Revenues jumped 15.1% year over year to $68.6 million and EBITDA
surged 21% to $15.3 million.
The company registered a record in-quarter renewal rate by reaching
the 94% mark; the highest since the first quarter of 2006.
Moreover, the 23% increase in annualized net new sales also marked
a record first quarter upside.
Guidance for 2012 Raised
After reporting solid first quarter results, CoStar Group raised
its sales outlook for 2012 to between $284 million and $288 million
from $281-$285 million. Adjusted EPS is now projected at $1.32 to
$1.40, instead of $1.27-$1.39.
The completion of the LoopNet acquisition at the end of April
further boosted its outlook for 2012. CoStar now estimates revenues
in the range of $339 million to $347 million and adjusted EPS in
the range of $1.36 to $1.52.
Earnings Estimates Moving Higher
The Zacks Consensus Estimate for 2012 and 2013 rose 1.5% and 14.5%
in the past 30 days to $1.22 and $1.90, respectively. This implies
year-over-year estimated growth of 37% in 2012 and 55% in 2013.
Valuation Looks Expensive
Though the stock of CoStar Group is expensive with respect to most
valuation metrics, it looks reasonable from its book value
perspective. On a price-to-book basis, the shares currently trade
at 2.80x, a 16.2% discount to the industry average of 3.34x. The
company's long-term EPS growth projection of 20% is also higher
than the 14.6% expected for the industry.
The stock has outperformed its 200 and 50-day moving averages over
the last 3 months. With increasing estimates and a series of
earnings beats, this stock should be a good addition to growth
CoStar Group is trading just 1.6% below its 52-week high. The
company generated a year-to-date return of 11.8% versus 3.5% for
About the Company
Located in Washington D.C., CoStar Group provides data and
information services to the commercial real estate industry in the
United States, United Kingdom and France. It was incorporated in
1987 and employs about 1,500 employees worldwide. With a market
capitalization of $1.90 billion, CoStar Group primarily competes
with Reis, Inc. (
) and First American Financial Corporation (
COSTAR GRP INC (CSGP): Free Stock Analysis
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