The S&P 500 is one of the most prestigious indexes in the stock market. It's comprised of 500 of the largest publicly traded companies and has become a benchmark for investing. So when a company gets added to the S&P 500, it's a pretty big deal.

In early September, S&P said was that real estate tech giant CoStar Group (CSGP -3.11%) would replace clothing company PVH Corp (PVH 0.70%). Does that make right now the right time to buy this real estate stock?

So what?

CoStar Group also announced its plan to issue $750 million of common stock in conjunction with the move to the S&P 500, which will take place prior to the opening of trading on Monday. Share issuance is a common method for raising capital for public companies, but its dilutive effect hurts current shareholders' value.

The news hasn't been taken positively by investors. Share prices for CoStar Group rose 4.8% since the switch to the S&P 500 was announced, but in light of the share issuance announcements, it fell nearly 3% while the broader S&P was up 0.1%, as of this writing.

CoStar says the money raised through the issuance will fund all or a portion of future strategic acquisitions and help the company expand.

Acquisitions are a core aspect of the company's business. It's how the real estate data company, which has over 25 subsidiary companies, including major real estate listing platforms Ten-X, Loopnet.com, Apartments.com, and ForRent.com, has been able to increase its earnings per share by 2,000% over the last 10 years.

The company tried to acquire RentPath in 2020 but was blocked by the Federal Trade Commission (FTC) for antitrust violations. It also placed a bid to acquire real estate data company CoreLogic but got cold feet in light of economic and housing market volatility. There's no news as to what company CoStar Group could acquire next, but with an extra $750 million on top of its already hefty sum of $4 billion in cash on hand, it will have more than enough buying power to back future growth.

Is now a good time to buy?

Getting added to the S&P 500 doesn't mean share prices for CoStar Group will instantly soar. But its general positive performance as of late, future growth opportunities, superb balance sheet, and now, new exposure by being added to the distinguished index does mean the company has a lot going for it.

In the second quarter of 2022, net income grew 37%, while earnings before interest, taxes, amortization, and depreciation (EBITDA) rose by 5% year over year. The company received a record number of new bookings on its listing platforms and launched CitySnap, a new platform focused on residential housing in New York City. Its earnings exceeded expectations and prompted the company to raise its forecast for the full year, with revenue of as much as $2.18 billion, a 12% jump from last year.

Plus, its balance sheet couldn't be better. It only has $1 billion in debt, with $4 billion in cash and cash equivalents as of Q2 2022. The company could pay off all of its debt and still have $3 billion left over to fund its operations and future acquisitions. 

CoStar's share price has fallen 20% during the past year. That's partly due to general market volatility but also in response to the growing concern of a housing market setback. Its discounted price might mean now is a great time to buy, but investors should be aware that the shares are rather richly valued. Its price-to-earnings ratio is 88, which isn't out of the historical range for the company but is still high compared to more popular high-growth tech companies.

Over the last 25 years, the stock has provided a total annual return of 20%, nearly three times that of the S&P 500. Achieving the same rate of growth may be difficult given the company's size, but I think there's still a lot of upside for the company and its shareholders in the decades to come.