When it comes to high-growth real estate stocks, few can compare or compete with CoStar Group (CSGP 0.00%). This digital real estate data provider has its hand in virtually every aspect of real estate. It owns popular real estate listing websites including Loopnet, Ten-X, Apartments.com, Homes.com, and Homesnap, among several others.
Over the last decade, the stock has soared 777%, providing an annualized return of roughly 24% — nearly double that of the S&P 500. Its latest earnings, which were released on July 26, 2022, showed promising results for the company exceeding analysts’ expectations, causing its share price to jump 19% during the last week.
If you’re looking for a valuable growth stock that’s still delivering solid results in a challenging market, here’s why you should consider CoStar Group.
Growth opportunities are abundant
One of the biggest reasons CoStar has delivered such tremendous results over the last decade is its acquisition of established online platforms. Since 2020, CoStar has spent $600 million acquiring Ten-X, Homesnap, Homes.com, and Emporis, which has helped it branch into the residential, distressed, and international real estate markets.
2021 was its first year in the residential market, with HomeSnap and Homes.com driving $75 million in new revenue for the company. CoStar believes it’s nowhere near meeting the addressable market and has used aggressive marketing efforts to expand users and revenue from these sites.
It also just launched CitySnap, a New York City-focused listing platform that’s expected to bring the company new business. It also has $4 billion in cash on hand to help with its expansionary efforts. Even after you deduct its roughly $1 billion in outstanding debt, it still has $3 billion to use to go on a shopping spree in the coming years.
Performance remains strong
In Costar’s fiscal fourth quarter of 2022, its results were positive, with net bookings on its websites up 66% year over year. The company ultimately grew revenue by 12%. It also has grown its earnings before interest, taxes, depreciation, and amortization (EBITDA) by 25% and its earnings per share (EPS) by 40% over the last year.
Quarter over quarter, the company is breaking records for sales activity with Apartments.com and Loopnet.com, with its data services through CoStar Group leading the way. While there are growing concerns over the impact of a real estate downturn and recession, investors should remember that CoStar Group was able to set new sales records at a very turbulent time in the real estate market in the last few years.
Commercial real estate, the industry to which CoStar has the largest exposure, was on rocky ground at the start of the pandemic, with many sectors still struggling to fully recover. Now that CoStar Group has expanded its presence into the residential industry, a pullback in traffic to its sites due to a recession or diminished buying interest would definitely hinder growth, but it wouldn’t stop the company altogether. What’s more, it’s got more than enough cash to float its operations and continue to expand.
Unlike most other tech stocks, CoStar Group has not been hard hit in the tech crash. It’s down just 17% over the past year, while many other real estate tech stocks, like Zillow and Redfin, are down 64% or more. Today, its price-to-earnings ratio (P/E ratio) is 86 — which is high but below many other growth tech stocks like Tesla, Amazonor Zillow.
CoStar Group will likely continue to expand its businesses using its liquidity to fuel new acquisitions and pump money into existing platforms. If you’re looking for a stock to continue its positive momentum during market volatility, CoStar Group is a clear buy.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Liz Brumer-Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, CoStar Group, Redfin, Tesla, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool recommends the following options: short August 2022 $13 calls on Redfin. The Motley Fool has a disclosure policy.