I haven't seen anyone talk about any short ideas but I wanted to bring Costar Group (CSGP) to your attention. I work in the real estate industry so I am fairly familiar with the product that Costar offers. They basically provide a data and analytics package used by practically everyone (brokers, landlords, appraisers, investors, etc.) in the commercial real estate industry.
Historic revenues are as follows for the past five years
2010 (TTM) $223 MM
2009 $210 MM
2008 $212 MM
2007 $193 MM
2006 $159 MM
Below are estimated and actual EPS.
2011E $1.07
2010E $0.63
2009 $0.94
2008 $1.26
2007 $0.82
2006 $0.65
With a market cap of $1.2 B and a share price of $57, trailing P/E is 90x and forward P/E is 54x on consensus expected EPS growth of 70%! To be fair to Costar, earnings have been depressed recently because they have been relocating their headquarters to Washington, DC.
Costar's biggest problem in my mind is that it is too successful, quite honestly. Everyone in commercial real estate uses it. Therefore, I find its growth prospects to be very questionable.
For fun, I did a back of the envelope reasonableness check. Not that I necessarily agree with the analysts but suppose I give them the benefit of the doubt about 2011 EPS, as after all it is in line with historical performance. Now suppose that over a ten year period, EPS grows by 20% per year, every year. EPS in Year 10 would then be a healthy $5.52. Smack on a 20x P/E and a very aggressive 10% discount rate and the present value implies a share price of $42.57!
Growth numbers like these invite competition and although Costar provides a very desired service, its moat should not be viewed as impenetrable by any means.
I run a value investing blog and am thinking about running with the above idea as my next post. I would appreciate any constructive criticism on the above thesis.