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The five-year decline in earnings might be taking its toll on CoStar Group (NASDAQ:CSGP) shareholders as stock falls 5.6% over the past week

CoStar Group, Inc. (NASDAQ:CSGP) shareholders have seen the share price descend 14% over the month. But at least the stock is up over the last five years. Unfortunately its return of 44% is below the market return of 95%.

In light of the stock dropping 5.6% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

View our latest analysis for CoStar Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

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CoStar Group's earnings per share are down 0.8% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

On the other hand, CoStar Group's revenue is growing nicely, at a compound rate of 14% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

CoStar Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling CoStar Group stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

Investors in CoStar Group had a tough year, with a total loss of 4.5%, against a market gain of about 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 8%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for CoStar Group that you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.