Stock Analysis on Net
Stock Analysis on Net

CoStar Group Inc. (NASDAQ:CSGP)

This company has been moved to the archive! The financial data has not been updated since July 26, 2023.

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

CoStar Group Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 12.34%
01 FCFF0 472,888
1 FCFF1 500,749 = 472,888 × (1 + 5.89%) 445,759
2 FCFF2 536,469 = 500,749 × (1 + 7.13%) 425,113
3 FCFF3 581,395 = 536,469 × (1 + 8.37%) 410,121
4 FCFF4 637,302 = 581,395 × (1 + 9.62%) 400,189
5 FCFF5 706,495 = 637,302 × (1 + 10.86%) 394,920
5 Terminal value (TV5) 52,954,351 = 706,495 × (1 + 10.86%) ÷ (12.34% – 10.86%) 29,600,709
Intrinsic value of CoStar Group Inc. capital 31,676,812
Less: Long-term debt, net (fair value) 989,210
Intrinsic value of CoStar Group Inc. common stock 30,687,602
 
Intrinsic value of CoStar Group Inc. common stock (per share) $75.15
Current share price $84.38

Based on: 10-K (reporting date: 2022-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

CoStar Group Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 34,455,442 0.97 12.63%
Long-term debt, net (fair value) 989,210 0.03 2.22% = 2.80% × (1 – 20.67%)

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 408,336,600 × $84.38
= $34,455,442,308.00

   Long-term debt, net (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (24.05% + 27.58% + 16.18% + 19.44% + 16.08%) ÷ 5
= 20.67%

WACC = 12.34%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

CoStar Group Inc., PRAT model

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Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in thousands)
Interest expense 32,325 32,316 21,794 2,615 2,830
Net income 369,453 292,564 227,128 314,963 238,334
 
Effective income tax rate (EITR)1 24.05% 27.58% 16.18% 19.44% 16.08%
 
Interest expense, after tax2 24,551 23,403 18,268 2,107 2,375
Interest expense (after tax) and dividends 24,551 23,403 18,268 2,107 2,375
 
EBIT(1 – EITR)3 394,004 315,967 245,396 317,070 240,709
 
Long-term debt, net 989,210 987,944 986,715 — —
Stockholders’ equity 6,870,121 5,711,672 5,375,359 3,405,593 3,021,942
Total capital 7,859,331 6,699,616 6,362,074 3,405,593 3,021,942
Financial Ratios
Retention rate (RR)4 0.94 0.93 0.93 0.99 0.99
Return on invested capital (ROIC)5 5.01% 4.72% 3.86% 9.31% 7.97%
Averages
RR 0.95
ROIC 6.17%
 
FCFF growth rate (g)6 5.89%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

1 See details »

2022 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 32,325 × (1 – 24.05%)
= 24,551

3 EBIT(1 – EITR) = Net income + Interest expense, after tax
= 369,453 + 24,551
= 394,004

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [394,004 – 24,551] ÷ 394,004
= 0.94

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 394,004 ÷ 7,859,331
= 5.01%

6 g = RR × ROIC
= 0.95 × 6.17%
= 5.89%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (35,444,652 × 12.34% – 472,888) ÷ (35,444,652 + 472,888)
= 10.86%

where:

Total capital, fair value0 = current fair value of CoStar Group Inc. debt and equity (US$ in thousands)
FCFF0 = the last year CoStar Group Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of CoStar Group Inc. capital

FCFF growth rate (g) forecast

CoStar Group Inc., H-model

Microsoft Excel
Year Value gt
1 g1 5.89%
2 g2 7.13%
3 g3 8.37%
4 g4 9.62%
5 and thereafter g5 10.86%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 5.89% + (10.86% – 5.89%) × (2 – 1) ÷ (5 – 1)
= 7.13%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 5.89% + (10.86% – 5.89%) × (3 – 1) ÷ (5 – 1)
= 8.37%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 5.89% + (10.86% – 5.89%) × (4 – 1) ÷ (5 – 1)
= 9.62%