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CoStar Group Inc. Stock Upgraded (CSGP)

NEW YORK (TheStreet) -- CoStar Group (Nasdaq:CSGP) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, revenue growth, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:

  • Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 8.89 is very high and demonstrates very strong liquidity.
  • The revenue growth came in higher than the industry average of 3.6%. Since the same quarter one year prior, revenues rose by 11.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for COSTAR GROUP INC is currently very high, coming in at 70.70%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 3.60% trails the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • COSTAR GROUP INC's earnings per share declined by 43.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, COSTAR GROUP INC reported lower earnings of $0.64 versus $0.95 in the prior year. For the next year, the market is expecting a contraction of 20.3% in earnings ($0.51 versus $0.64).

CoStar Group, Inc. provides information/marketing services to the commercial real estate industry in the United States, the United Kingdom, and France. The company has a P/E ratio of 107.7, above the average diversified services industry P/E ratio of 104.2 and above the S&P 500 P/E ratio of 17.7. CoStar Group has a market cap of $1.6 billion and is part of the services sector and diversified services industry. Shares are up 10.4% year to date as of the close of trading on Tuesday.

You can view the full CoStar Group Ratings Report or get investment ideas from our investment research center.

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