Corelogic Inc: Why 56% Gain This Year Could Lead to Another Breakout

Corelogic Inc: The Future of Real Estate Big Data Analytics

Amid the pandemic, America’s housing market continues to sizzle, driven by the historically low financing rates. The real estate sector is also becoming more data-savvy, demanding big data analytics. To play this shift to technology, Corelogic Inc (NYSE:CLGX) aims to be the go-to solution.

CLGX employs advanced financial modeling by super-smart people to provide in-depth market intelligence covering nearly 100% of U.S. property records. The end result is a source with over 200 analytical models and over 5,000 data fields for real estate professionals.

Based on the market action, Corelogic stock has attracted the attention of Wall Street. CLGX stock is up 56% this year.

Despite the rise in Corelogic Inc, the valuation still looks reasonable, especially when you compare it to other big data stocks.

The chart of Corelogic stock shows the strong, V-shaped share rally from the March low, followed by the bullish golden cross and upside gap breakout. The buying in CLGX stock was supported by a rising relative strength index (RSI) and moving average convergence/divergence (MACD).

Chart courtesy of StockCharts.com

Corelogic has since been drifting in a narrow, sideways channel as both the RSI and MACD fall to neutral. The downside risk is the 200-day moving average and the covering of the gap.

Big Profits Power Bull Case for CLGX Stock

Corelogic is a billion-dollar revenue company. Revenues grew in 2015 and 2016, but have since marginally declined in the last three years.

(Source: “CoreLogic, Inc.,” MarketWatch, last accessed October 22, 2020.)

There is some optimism. Corelogic is expected to halt the three-year decline, ramping up revenues by 9.3% to $1.9 billion this year, before returning to slight negative growth of 0.6% to $1.9 billion in 2021. (Source: “CoreLogic, Inc. (CLGX),” Yahoo! Finance, last accessed October 22, 2020.)

CLGX is also producing positive earnings before interest, taxes, depreciation, and amortization (EBITDA) profits on a generally accepted accounting principles (GAAP) and adjusted basis, along with positive free cash flow.

The EBITDA picture is strong, with growth in four of the last five years. Moreover, EBITDA grew in 2018 and 2019, when revenues contracted.

(Source: MarketWatch, op. cit.)

The profit history isn’t as consistent for Corelogic stock, as shown in the table. The results in 2018 and 2019 were especially disappointing.

(Source: MarketWatch, op. cit.)

But there are some positive developments. Corelogic is attracting upward revisions in its consensus earnings per share (EPS) estimates over the past 90 days.

The estimates look impressive. CLGX is estimated to report an adjusted $3.93 per diluted share this year, much higher than the $2.83 per diluted share in 2019.

For 2021, when revenues are expected to fall, earnings are slated to rise to $3.98 and as high as $4.29 per diluted share. (Source: Yahoo! Finance, op. cit.)

Corelogic has beaten the consensus EPS in the first two quarters of 2020.

The company is also generating consistent positive free cash flow (FCF) despite recording declines from 2017 to 2019.

(Source: MarketWatch, op. cit.)

As far as the financial risk goes, CLGX has relatively high debt of $1.7 billion in its balance sheet. But given the profitability and FCF, along with cash of $137.3 million, I don’t foresee any issues at this time. (Source: Yahoo! Finance, op. cit.)

Analyst Take

Corelogic Inc offers investors a high-potential play on the future of big data solutions in the real estate market.

While CLGX stock has returned strong price appreciation this year, Corelogic trades at a reasonable 17.7 times its consensus 2021 EPS and a price/earnings to growth (PEG) ratio of 1.48.

CLGX stock deserves a higher multiple given the growth and prospects for added growth in big data usage. For instance, a multiple expansion to 25 times is not far-fetched, and implies a 42% upside for Corelogic stock.