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CoStar Group (CSGP) Stock Sinks As Q3 Earnings Meet Valuation Doubts

Simply Wall St · 1d ago

CoStar Group just gave investors a harsh wake up call. The stock dropped almost 14% to US$27.54 in Wednesday trading even though the latest Q3 2026 release showed US$952m in revenue and US$74m in net income from its data heavy property platforms.

Short term traders focused on the price slide. Long term holders will be more interested in the expanding adjusted EBITDA story with Q3 profit of US$229m and a higher full year profit outlook. The real question now is how that profit ramp lines up against a rich P/E and sensitive valuation over the next few years.

Impressed by CoStar Group’s expanding adjusted EBITDA but uneasy about paying up for a rich P/E and sensitive valuation risk over the next few years? If you want a list of companies that aim to pair solid balance sheets with stronger value support, check out the 29 high quality undervalued stocks.

Q3 2026 Earnings Summary

  • Revenue (Q3 2026 vs Q3 2025): US$952m vs. US$833.6m (up about 14%)
  • Net Income, Excluding Extra Items (Q3 2026 vs Q3 2025): US$74m vs. a loss of US$30.9m (swing back to profit)
  • Basic EPS, Earnings Per Share (Q3 2026 vs Q3 2025): US$0.184262 vs. a loss of US$0.073588 (return to positive earnings per share)
  • Adjusted EBITDA, Earnings Before Interest, Tax, Depreciation and Amortization (Q3 2026 vs Q3 2025): US$229m compared with about half that level a year ago (record quarterly profit on this basis)

Earnings paint one picture, but investors who care about what they are paying for CoStar Group often focus on the cash moving through the business. Look at CoStar Group's cash flows alongside those reported profits and the stock could be a slight 9% overvalued.

NasdaqGS:CSGP Trailing 12-Month Revenue & Expenses Breakdown as at Oct 2026
NasdaqGS:CSGP Trailing 12-Month Revenue & Expenses Breakdown as at Oct 2026

Evaluating CoStar’s Monetization Milestones Against the Hype

The bullish story hinges on CoStar Group turning product initiatives into real, higher quality earnings, not just cutting costs.

"The main thing that has to go right is continued execution on Homes.com monetization, AI-driven efficiency and international expansion without eroding customer value or growth."

Q3 gives partial evidence this is happening. Homes.com revenue rose about 50% with the new Platinum tier and the residential segment delivered US$49m of adjusted EBITDA, even excluding Zonda. AI driven efficiencies helped push group adjusted EBITDA to US$229m and a roughly 24% margin. International is earlier, but UK and Canada bookings and subscriber data show progress rather than a stall.

One Narrative has put a figure on that disagreement. → See the Narrative with its higher Fair Value, assumptions and all.

CoStar Bear Case Bites As Bookings Stall

Bearish analysts argue CoStar Group is leaning too hard into margin preservation and letting future growth engines slow.

"While Homes.com is reporting strong subscriber and revenue metrics, the 21% sequential reduction in sales headcount and shift toward a smaller field team risks slowing the ramp of new bookings and depth advertising, which could constrain residential revenue and delay the point at which this ecosystem materially lifts group level earnings."

Q3 results give that concern teeth. Annualized net new bookings fell to US$37m from US$84m a year ago, and total sales reps are down about 10%. Apartments.com paid properties slipped 2% sequentially. Management now talks about rebuilding experienced field sales into 2027, which suggests the growth engine is not firing on all cylinders yet.

Hunt For Earnings Disconnects

CoStar Group just showed how a busy earnings print and a sharp price move can pull in opposite directions. The real opportunity could sit in stocks that look undervalued before that gap closes.

  • Company 1 - 31% below our estimate - focuses on lifting margins through a unified operating system, tighter site footprint and higher value aftermarket valve work.
  • Company 2 - 15% below our estimate - rides surging orders from hyperscale data center builds while managing rising receivables, working capital demands and concentrated project exposure.
  • Company 3 - 22% below our estimate - extends a teahouse network into new overseas markets as memberships, transaction volumes and services reshape franchise and owned store economics.

Three companies from the same screener. Open all 29 potentially undervalued companies →