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Costar Group (CSGP): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q3 2026, to Sep 30, 2026, filed Oct 28, 2026; rules v1.1
Costar Group (CSGP): 2 rules of 10 triggered on the filings to Sep 30, 2026: stock compensation added back = no economic cost; FCF growth = the business improved. 1 to review; 1 with insufficient data; 3 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
Stock compensation added back = no economic cost Triggered · severity medium · confidence high
Stock compensation was $194M, 6.0% of revenue, in FY2025; buybacks were $500M (2.6× the SBC) and the diluted share count still rose 3.2%. 'Adjusted' figures that add SBC back treat pay in shares as free; the cost is borne by every shareholder as dilution, or by the cash spent to buy the shares back.
Innocent reading: A young company paying in equity while it scales; intensity falls as revenue grows.
FCF growth = the business improved Triggered · severity medium · confidence medium
Free cash flow rose $309M, from −$186M to $123M, but capital expenditure fell by $272M: 88% of the increase came from sources that need not repeat. Operating cash flow before working capital rose by $161M.
Innocent reading: An expansion programme finished, so capex fell back to maintenance levels for good.
A precise DCF value = the true value To review · confidence high
The DCF's point value is 9.68 a share (price 30.55); 62% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 4.84 to 14.52; across every method the research ran the range is -18 to 58. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Triggered severity medium · confidence medium
Free cash flow rose $309M, from −$186M to $123M, but capital expenditure fell by $272M: 88% of the increase came from sources that need not repeat. Operating cash flow before working capital rose by $161M.
The figures and how they are read
| Fiscal year before | FY2024 |
| Fiscal year | FY2025 |
| Operating cash flow, year before | $393M |
| Operating cash flow | $430M |
| Capex, year before | $579M |
| Capex | $307M |
| Free cash flow, year before | −$186M |
| Free cash flow | $123M |
| Change in FCF | $309M |
| Change in capex | −$272M |
| Working capital: change in its cash contribution | −$124M |
| Of which: capex cut | $272M |
| Of which: working capital released | 0.00 |
| Share of the increase that need not repeat | +88.0% |
| Operating cash flow before working capital: change | 161000000.00 |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY2025 (cash flow statement, fiscal year) · FY2024 (cash flow statement, fiscal year before)
What would explain it innocently
- An expansion programme finished, so capex fell back to maintenance levels for good
- Suppliers agreed longer payment terms in a contract
- Inventory was brought down after a glut and will stay down
What to look for in the filing
- Maintenance capex (what it costs to keep the assets working)
- Supplier payment terms and any supply-chain financing
- Management's capex guidance for next year
What would show the trap does not apply
- Next year's FCF holds or rises with capex back at its earlier level and working capital no longer releasing cash
- The 10-K's capex guidance and the segment capex show the cut is a completed programme, not deferral
- The working-capital release matches a disclosed change in terms or a divestiture, not stretched payables or a collection push
Look again: next filing.
A07 Stock compensation added back = no economic cost Triggered severity medium · confidence high
Stock compensation was $194M, 6.0% of revenue, in FY2025; buybacks were $500M (2.6× the SBC) and the diluted share count still rose 3.2%. 'Adjusted' figures that add SBC back treat pay in shares as free; the cost is borne by every shareholder as dilution, or by the cash spent to buy the shares back.
The figures and how they are read
| Fiscal year | FY2025 |
| Stock compensation | $194M |
| Revenue | $3.2B |
| SBC / revenue | +6.0% |
| Buybacks | $500M |
| Buybacks / SBC | 2.6 |
| Diluted shares, year before | 407.8M shares |
| Diluted shares | 420.7M shares |
| Diluted shares: change | +3.2% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY2025 (stock compensation, buybacks and the diluted share count, fiscal year)
What would explain it innocently
- A young company paying in equity while it scales; intensity falls as revenue grows
- Buybacks at prices below intrinsic value make up for the dilution over time
- A one-off grant (an acquisition, a founder award) rather than a steady level
What to look for in the filing
- The share count after the latest buybacks (the next 10-Q's cover)
- The price paid for the buybacks against the shares' value
- Unvested awards outstanding
What would show the trap does not apply
- The diluted share count falls over two years with buybacks at least equal to the stock compensation
- Stock compensation falls as a share of revenue in each of the next two years
Look again: next filing.
B02 Receivables growing = future cash is certain Not triggered confidence medium
Receivables grew 15% against revenue 14% in Q3 2026; DSO 26 against a median of 24: collections are keeping pace with sales.
The figures and how they are read
| Quarter | Q3 2026 |
| Revenue, year over year | +14.1% |
| Receivables, year over year | +14.8% |
| Quarter before | Q2 2026 |
| Revenue y/y, quarter before | +18.4% |
| Receivables y/y, quarter before | +24.1% |
| Days sales outstanding | 25.8 |
| DSO, median of eight quarters | 24.4 |
| Receivables | $280M |
| Revenue | $952M |
receivables and revenue against the same quarter a year earlier; DSO = receivables / quarterly revenue × days, against the median of the eight quarters before
Source: Q3 2026 (receivables and revenue) · Q3 2025 (the same quarter a year earlier)
B08 Adjusted profit = economic profit Insufficient data
no reconciliation table read from the releases yet and fewer than three quarters with both an adjusted and a GAAP EPS
C02 Low net debt = no refinancing risk Not triggered confidence medium
$28M comes due within a year, 32.9× covered by cash and investments of $500M plus $422M of free cash flow.
The figures and how they are read
| Cash and investments | $500M |
| Debt | $1.0B |
| Net debt | $500M |
| Due within a year | $28M |
| Read from | the debt maturity table |
| Free cash flow, twelve months | $422M |
| Cash plus free cash flow | $922M |
| Coverage of what is due | 32.9 |
| Due in the second year | $28M |
| Balance sheet date | 2026-09-30 |
due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed
Source: FY2025 (debt maturities, cash and investments)
D03 EPS growth = profit growth Not applicable
a loss in one of the quarters: EPS growth has no meaning
E02 Low P/E at a cyclical peak = undervalued Not triggered confidence medium
Net income of $178M is not at a cyclical high against the last eight years (median $293M, best $375M): the P/E of 68.8× is on a normal year.
The figures and how they are read
| market value | $12.3B |
| net income ttm | $178M |
| pe ttm | 68.80 |
| net income median fy | $293M |
| pe mid cycle | 42.00 |
| net income peak fy | $375M |
| years | FY2018 / 238.0; FY2019 / 315.0; FY2020 / 227.0; FY2021 / 293.0; FY2022 / 369.0; FY2023 / 375.0; FY2024 / 139.0; FY2025 / 7.0 |
| down years in window | 3 |
P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median
Source: Q3 2026 (net income, trailing twelve months)
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is 9.68 a share (price 30.55); 62% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 4.84 to 14.52; across every method the research ran the range is -18 to 58. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | 9.68 |
| price | 30.55 |
| terminal value share | +62.3% |
| swing by input | Operating margin / ±3 pts / 4.84 / 14.52; Revenue growth (each year) / ±5 pts / 7.97 / 11.69; WACC / ±1 pt / 8.28 / 11.64; Working capital per $ of growth / ±10 pts / 9.05 / 10.31 |
| range all methods | -18.19; 57.65 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → Costar Group: cash flow → Earnings quality score →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.