At 199% above intrinsic value, CoStar offers the opposite of margin of safety at $39.98 versus $13.36 fair value.
This framework sees a business trading at 149x earnings while burning $150.6M quarterly — the antithesis of margin of safety.
Does the price protect me from permanent loss of capital?
This framework sees no margin of safety whatsoever. The price demands not just perfection but sustained miracles, with the stock needing to fall two-thirds to reach fair value. At 149x earnings, even a return to historical median multiples would devastate capital.
Does equity risk offer adequate compensation over bonds?
Applying this lens reveals an investment offering one-twenty-fifth the return of risk-free treasuries. Even with 18.7% revenue growth, the earnings yield remains deeply unattractive. This framework would never accept 0.17% returns when bonds pay 4.33% with zero risk.
Can this company survive a prolonged downturn?
The balance sheet shows strength with substantial cash and negative net debt, though liquidity ratios have deteriorated markedly. However, at the current burn rate of $150.6M quarterly, even this fortress could be depleted in 11 quarters without operational improvement.
What do I receive per dollar of price paid?
This framework finds the price unconscionable — paying $149 for $1 of earnings while the business consumes cash at record rates. The 210x EBITDA multiple and negative free cash flow make this among the most expensive propositions in the market.
Applying the Graham framework to CoStar reveals a speculation, not an investment. At 149x earnings with negative free cash flow and deteriorating margins, the price offers no protection against capital loss — only exposure to it. The framework would wait for Mr. Market to offer a price with a margin of safety, perhaps after reality tempers current euphoria. When treasury bills pay 4.33% risk-free, why accept 0.17% with substantial risk?
This analysis applies Benjamin Graham's published investment framework to publicly available financial data. It is not authored by, endorsed by, or affiliated with Benjamin Graham. Educational purposes only. Not financial advice.