Is CoStar Group Inc (CSGP) As Strong As Its Balance Sheet Indicates?
CoStar Group Inc (NASDAQ:CSGP) is a large-cap stock, with a market capitalization of USD $10.87B, operating in the costar group, inc. provides information, analytics, and online marketplace to the commercial real estate industry in north america and internationally. industry. Most investors favour these stocks due to their strong balance sheet and high market liquidity, meaning there are an adundance of stock in the public market available for trading. These firms won’t be left high and dry if liquidity dries up, and they will be relatively unaffected by rises in interest rates. Today I will analyse the latest financial data for CSGP to determine is solvency and liquidity and whether the stock is a sound investment. View our latest analysis for CoStar Group
Is CSGP’s level of debt at an acceptable level?
Debt-to-equity ratio standards differ between industries, as some some are more capital-intensive than others, meaning they need more capital to carry out core operations. Generally, large-cap stocks are considered financially healthy if its ratio is below 40%. In the case of CSGP, the debt-to-equity ratio is 17.33%, which indicates that its debt is at an acceptable level. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings at least three times its interest payments is considered financially sound. CSGP’s profits amply covers interest at 19.17 times, which is seen as relatively safe. Debtors may be willing to loan the company more money, giving CSGP ample headroom to grow its debt facilities.
How does CSGP’s operating cash flow stack up against its debt?
A simple way to determine whether the company has put debt into good use is to look at its operating cash flow against its debt obligation. This also assesses CSGP’s debt repayment capacity, which is not a big concern for a large company. CSGP’s recent operating cash flow was 0.69 times its debt within the past year. A ratio of over 0.5x is a positive sign and shows that CSGP is generating more than enough cash from its core business, which should increase its potential to pay back near-term debt.
Next Steps:
Are you a shareholder? CSGP’s high cash coverage and low levels of debt indicate its ability to use its borrowings efficiently in order to produce a healthy cash flow. Since CSGP’s capital structure could change, I encourage examining market expectations for CSGP’s future growth on our free analysis platform.
Are you a potential investor? While understanding the serviceability of debt is important when evaluating which companies are viable investments, it shouldn’t be the deciding factor. Ultimately, debt is often used to fund or accelerate new projects that are expected to improve a company’s growth trajectory in the longer term. CSGP’s Return on Capital Employed (ROCE) in order to see management’s track record at deploying funds in high-returning projects.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
