What does this company do and how does it make money?

CoStar operates two main businesses: commercial real estate information (CoStar Suite) and residential marketplaces (Apartments.com, Homes.com). The 94% renewal rates suggest strong customer retention, but the concentration in one product line and one geography creates vulnerability. The near-perfect correlation with inflation indicates pricing power but also suggests growth is more about price increases than volume expansion.

Five legendary investment frameworks analyzed this company.

Mauboussin sees a 11-point growth expectations gap worth betting on at 149x earnings, while Buffett asks why anyone would accept 0.17% returns when treasuries pay 4.33% — and they're both looking at the same $150.6M quarterly cash burn. Tap any framework below to see their full analysis and position.

How much cash does it generate and where does it go?

The company generated positive operating cash flow but turned deeply negative on free cash flow due to a massive infrastructure buildout. Capex intensity surged from 7.5% to 34.7% of revenue in two years, consuming all cash generation and more. The elimination of stock compensation is unusual but the strong balance sheet provides cushion during this investment phase.

Is the business getting stronger or weaker?

Revenue acceleration masks fundamental deterioration across all profitability metrics. Gross margins hit record lows while ROIC fell below cost of capital by nearly 8 percentage points. The business is growing revenue but destroying economic value, suggesting the growth is coming at unsustainable cost.

What could go wrong and has it survived trouble before?

High concentration in one product creates single point of failure risk. The 2.45x operating leverage amplifies any revenue weakness into larger earnings declines. Liquidity sits at decade lows while the company burns $150M quarterly. Management's buying while institutions reduce exposure suggests divergent views on these risks.

At 149x earnings with a -$150.6M quarterly cash burn, CoStar tests whether 94% renewal rates can justify any price.

Is the stock priced for perfection, fair value, or pessimism?

The stock trades at extreme valuations by every measure, with an earnings yield below 1% while risk-free treasuries pay 4.33%. The market prices 199% above fundamental value yet expects growth to decelerate from 18.7% to 7.41%. Even perfect execution disappoints at these levels — the average price reaction to double beats is negative.