Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
CoStar Group Inc., profitability ratios
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).
The financial data reveals several noteworthy trends over the five-year period under review. Profitability metrics exhibit fluctuations with varying degrees of improvement and decline.
- Gross Profit Margin
- This margin has shown a consistent upward trend from 77.35% in 2018 to a peak of 81.62% in 2021, followed by a slight decrease to 81.03% in 2022. Overall, the gross profit margin reflects a strengthening ability to generate profit from core operations before accounting for operating expenses.
- Operating Profit Margin
- The operating profit margin increased from 22.95% in 2018 to a high of 25.97% in 2019 but then declined noticeably to 17.43% in 2020. It recovered moderately to 22.24% in 2021, followed by a slight reduction to 20.66% in 2022. This indicates some volatility in operating efficiency or expense management over the time span, with a notable dip during 2020.
- Net Profit Margin
- The net profit margin increased from 20% in 2018 to 22.5% in 2019, then experienced a significant decline to 13.69% in 2020. Subsequent years show a gradual recovery to 15.05% in 2021 and further improvement to 16.93% in 2022. This trend possibly reflects external pressures or one-time impacts affecting bottom-line profitability, with partial recovery in recent years.
- Return on Equity (ROE)
- ROE generally followed a downward trajectory, beginning at 7.89% in 2018 and increasing slightly to 9.25% in 2019, before falling sharply to 4.23% in 2020. Modest improvements occurred subsequently, reaching 5.38% by 2022. This decline indicates reduced efficiency in generating returns from shareholders’ equity during the more recent years.
- Return on Assets (ROA)
- ROA mirrors the ROE pattern, starting at 7.19% in 2018 and rising to 8.17% in 2019, followed by a steep fall to 3.28% in 2020. Improvement to 4.4% in 2022 shows a partial rebound but remains well below earlier levels. This indicates decreased effectiveness in utilizing assets to generate profit, particularly in the midst of the period analyzed.
Return on Sales
Return on Investment
Gross Profit Margin
CoStar Group Inc., gross profit margin calculation
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 2022 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenues
= 100 × 1,768,391 ÷ 2,182,399 = 81.03%
- Revenue Trends
- Revenues have shown a consistent upward trend over the five-year period from 2018 to 2022. The revenue increased from approximately $1.19 billion in 2018 to about $2.18 billion in 2022, nearly doubling over this timeframe. This steady increase suggests strong growth and expanding business activities.
- Gross Profit Trends
- Gross profit has also increased steadily in line with revenues. It rose from roughly $922 million in 2018 to approximately $1.77 billion in 2022. The growth in gross profit is consistent with the revenue increases, indicating effective cost management and operational scaling.
- Gross Profit Margin Trends
- Gross profit margin, expressed as a percentage, has shown a gradual improvement from 77.35% in 2018 to a peak of 81.62% in 2021, before a slight decline to 81.03% in 2022. Overall, the margin has remained above 77%, reflecting a strong and stable profitability ratio over the years. The minor decrease in 2022 may warrant further monitoring but does not currently indicate significant margin deterioration.
- Summary of Insights
- The data reflect sustained growth in both revenue and gross profit, coupled with stable and high gross profit margins above 77%. This pattern suggests that the company has maintained efficient operations and pricing power, effectively managing costs even as revenues increased. The slight margin variation in the last year indicates a need for ongoing margin management to sustain profitability levels.
Operating Profit Margin
CoStar Group Inc., operating profit margin calculation, comparison to benchmarks
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 2022 Calculation
Operating profit margin = 100 × Income from operations ÷ Revenues
= 100 × 450,949 ÷ 2,182,399 = 20.66%
- Revenue Trends
- Revenues exhibited a consistent upward trajectory over the five-year period, starting at approximately $1.19 billion in 2018 and increasing steadily each year to reach about $2.18 billion in 2022. This represents an overall growth of roughly 83% from 2018 to 2022, indicating strong top-line expansion.
- Income from Operations
- Income from operations also showed general growth from 2018 through 2022, increasing from approximately $274 million in 2018 to around $451 million in 2022. Despite a dip in 2020 to about $289 million, income from operations rebounded significantly thereafter, peaking in 2022. This suggests a recovery and improvement in operational profitability following a decline during the 2020 period.
- Operating Profit Margin
- The operating profit margin fluctuated over the period, starting at 22.95% in 2018 and peaking at nearly 25.97% in 2019. It then declined sharply to 17.43% in 2020, before partially recovering to 22.24% in 2021 and settling at 20.66% in 2022. This volatility reflects variations in operational efficiency or cost structures, with a notably lower margin in 2020 possibly linked to external market pressures or increased costs during that year.
- Overall Insights
- The financial data reveals robust revenue growth and a generally positive trend in income from operations over the five-year span. However, the operating profit margin indicates some challenges in maintaining consistent profitability margins, particularly during 2020. The recovery in both income and margin post-2020 highlights the company's ability to adapt and improve profitability after a period of stress. Continued focus on operational efficiency may be necessary to sustain and enhance profit margins alongside revenue growth.
Net Profit Margin
CoStar Group Inc., net profit margin calculation, comparison to benchmarks
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 2022 Calculation
Net profit margin = 100 × Net income ÷ Revenues
= 100 × 369,453 ÷ 2,182,399 = 16.93%
- Revenues
- Revenues exhibited a consistent upward trend from 2018 to 2022. Starting at approximately $1.19 billion in 2018, revenues increased steadily each year, reaching about $2.18 billion by the end of 2022. This reflects a significant growth trajectory, nearly doubling over the five-year span.
- Net Income
- Net income demonstrated more variability compared to revenues. It rose from $238 million in 2018 to a peak of nearly $315 million in 2019, then declined to around $227 million in 2020. Following this dip, net income recovered, increasing to approximately $293 million in 2021 and further to $369 million in 2022. Despite the fluctuation in 2020, the overall trend shows growth in net income over the period.
- Net Profit Margin
- The net profit margin percentage displayed notable fluctuations. It increased from 20% in 2018 to a peak of 22.5% in 2019, then sharply decreased to 13.69% in 2020. Subsequently, it experienced a gradual recovery to 15.05% in 2021 and further improvement to 16.93% in 2022. Although still below the 2019 peak, the margin's recent upward movement suggests improving profitability after the decline observed in 2020.
- Overall Insights
- The data reveals strong revenue growth throughout the period, nearly doubling over five years. Net income followed a less consistent pattern, influenced potentially by operational or external factors in 2020 which lowered profitability margins significantly that year. The recovery in net income and profit margins post-2020 indicates an improved cost structure or operational efficiency. Despite the margin not fully returning to 2019 levels, the upward trajectory suggests progress towards enhanced profitability alongside expanding revenues.
Return on Equity (ROE)
CoStar Group Inc., ROE calculation, comparison to benchmarks
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 2022 Calculation
ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 369,453 ÷ 6,870,121 = 5.38%
- Net Income
- The net income exhibits fluctuations over the observed period. Starting at $238.3 million in 2018, there was a notable increase to $315.0 million in 2019. However, 2020 saw a decline to $227.1 million, followed by a recovery to $292.6 million in 2021 and a further increase reaching $369.5 million in 2022. Overall, net income shows an upward trend from the initial to the final year, despite the dip in 2020.
- Stockholders’ Equity
- Stockholders' equity consistently increased each year. It rose from approximately $3.02 billion in 2018 to $3.41 billion in 2019, and then surged significantly to $5.38 billion in 2020. The growth continued to $5.71 billion in 2021 and reached $6.87 billion by 2022. This steady increase illustrates a strong accumulation of equity capital over the five-year period.
- Return on Equity (ROE)
- The return on equity, expressed as a percentage, demonstrates a declining trend from 7.89% in 2018 to a low of 4.23% in 2020. Although a slight recovery occurred in 2021 and 2022, reaching 5.12% and 5.38% respectively, the ROE did not return to the levels seen at the start of the period. This pattern indicates that while the company increased its equity base substantially, the efficiency in generating profits relative to equity weakened.
- Overall Analysis
- The data reveals that while net income generally improved toward the end of the period, it experienced volatility, with a significant dip in 2020. The company’s equity base expanded robustly, suggesting capital strengthening and growth investment. However, the ROE declined, indicating reduced profit generation efficiency from the larger equity base. This could signal increased equity not immediately matched by proportionate income growth, warranting attention to operational efficiency and return optimization.
Return on Assets (ROA)
CoStar Group Inc., ROA calculation, comparison to benchmarks
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 2022 Calculation
ROA = 100 × Net income ÷ Total assets
= 100 × 369,453 ÷ 8,402,470 = 4.40%
- Net Income
- The net income exhibited a fluctuating but generally upward trend over the five-year period. Starting at 238,334 thousand USD in 2018, the net income increased significantly to 314,963 thousand USD in 2019, followed by a notable decline to 227,128 thousand USD in 2020. Subsequently, the net income rebounded to 292,564 thousand USD in 2021 and continued to rise, reaching the highest level of 369,453 thousand USD in 2022. This pattern suggests a recovery and growth phase after a temporary setback in 2020.
- Total Assets
- Total assets showed consistent growth each year, nearly doubling from 3,312,957 thousand USD in 2018 to 8,402,470 thousand USD in 2022. The most significant increase occurred between 2019 and 2020, where assets jumped from approximately 3.85 billion USD to nearly 6.92 billion USD. This steady expansion indicates an aggressive asset accumulation strategy or successful investment activities over the observed period.
- Return on Assets (ROA)
- The ROA declined markedly from 7.19% in 2018 to a low of 3.28% in 2020, coinciding with the dip in net income during that year despite growing total assets. After 2020, the ROA displayed a modest recovery, increasing to 4.03% in 2021 and 4.4% in 2022. However, the ratio remained well below the levels seen in 2018 and 2019, suggesting that asset utilization efficiency weakened significantly in 2020 and only partially improved afterward.
- Overall Insights
- The company experienced substantial asset growth throughout the period, yet profitability as measured by ROA did not keep pace with asset increases, particularly in 2020. The net income volatility and the decline in ROA during 2020 may be indicative of operational challenges or market conditions adversely affecting returns that year. The recovery in net income and improvement in ROA after 2020 point to a gradual restoration of profitability and better asset utilization, though the efficiency still remains below earlier peak levels.