Zillow Group (ZG) has expanded its existing share repurchase authorization, approving up to an additional US$1.25b of Class A common stock and Class C capital stock, bringing the overall equity buyback pool to US$4.75b.

Even with the expanded buyback plan, Zillow Group’s recent share price performance has been weak. The 30 day share price return is 16% and the year to date share price return is 30% at a last close of US$45.97. The 1 year total shareholder return of 34.49% contrasts with a 3 year total shareholder return of 16.5% and a 5 year total shareholder return of 70.53%. This suggests recent momentum has been fading despite management’s continued confidence signalled by the repurchase authorization.

If this buyback news has you thinking about where else capital could go to work, now might be a good time to broaden your search and check out 19 top founder-led companies.

So with a larger buyback in place, improving revenue and net income, and the share price sitting well below some valuation estimates, you have to ask: Is Zillow Group undervalued today, or is the market already pricing in future growth?

Most Popular Narrative: 38.5% Undervalued

With Zillow Group’s fair value marked at $74.78 against a last close of $45.97, the most followed narrative sees a sizeable valuation gap worth understanding.

The accelerated digital transformation of real estate, combined with Zillow's leading traffic, engagement, and product innovation including AI powered tools, integrated communication platforms (Follow Up Boss), and immersive experiences (SkyTour) positions the company to expand market share and drive higher user conversion rates. This is likely to result in above industry revenue growth and higher monetization per transaction.

It may be useful to explore what earnings path and profit margins sit behind that valuation jump, and what kind of future multiple this narrative relies on to make the numbers work.

Result: Fair Value of $74.78 (UNDERVALUED)

However, litigation around real estate commissions and potential changes to listing distribution could pressure Premier Agent economics and weaken Zillow Group’s position in key broker relationships.

Another Way To Look At The Price

Our estimate of fair value at $74.78 suggests Zillow Group trades at a discount, but the sales multiple tells a different story. The current P/S of 4.3x sits above the fair ratio of 3.5x, the US Real Estate industry at 2.4x, and peers at 2.2x, which points to valuation risk if sentiment cools.

See what the numbers say about this price in more detail, and how they compare to similar businesses, by checking See what the numbers say about this price — find out in our valuation breakdown..

Next Steps

If the mix of buybacks, valuation gaps and risks feels like a lot to weigh up, it is worth checking the data yourself and moving quickly while sentiment is active. To see what the market is currently optimistic about, take a closer look at 3 key rewards.

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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.