Zillow’s stock price has taken a beating over the past six months, shedding 52.3% of its value and falling to $32.04 per share. This may have investors wondering how to approach the situation.
Is now the time to buy Zillow, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think Zillow Will Underperform?
Even though the stock has become cheaper, we’re swiping left on Zillow for now. Here are three reasons why there are better opportunities than ZG, plus one stock we’d rather own.
1. Revenue Spiraling Downwards
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Zillow’s demand was weak over the last five years as its sales fell at a 4.7% annual rate. This wasn’t a great result and is a sign of poor business quality.
2. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Zillow’s EPS grew at 10.6% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 4.7% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.
3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Zillow has shown poor cash profitability relative to peers over the last two years, giving the company fewer opportunities to return capital to shareholders. Its free cash flow margin averaged 12.8%, below what we’d expect for a consumer discretionary business.
Final Judgment
We see the value of companies helping consumers, but in the case of Zillow, we’re out. After the recent drawdown, the stock trades at 12.8× forward P/E (or $32.04 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better stocks to buy right now. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of Zillow
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
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Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
