I love real estate and Compass, Inc. (COMP) ranks as the nation’s largest and fastest growing residential real estate brokerage company, notes Adam Johnson, editor of Bullseye Brief.

What elevates Compass above competitors is its end-to-end customer relationship and workflow management platform, empowering agents to deliver exceptional service to to their clients.

The company’s 650 full-time software engineers have created a cloud-native, mobile-first, AI-powered platform that simplifies and supercharges the entire home transaction process… prospecting, listing, pricing, marketing, searching, touring, staging, transacting, closing.

This unique platform generates powerful results, including 21% faster closing times and 61% higher win rates for competitive listings. Revenues are on track to rise 70% this year to $6.3B, helping Compass capture 4% of the entire US residential market.

While several dozen software companies claim to offer real estate agents a fully integrated CRM platform, no other agency has developed its own software to match the breadth and flexibility of what Compass has created. Using proprietary data, custom analytics, artificial intelligence and machine learning, the platform supercharges Compass agents to deliver results.

For example, the software analyzes hundred of attributes for every listing every day and determines which  lead to faster sales, higher prices, competitive bids, etc.

Agents can screen for specific criteria by region and adjust their marketing accordingly. The added insight might empower an agent to recommend a seller employ the company’s interest-free loan program to renovate and/or stage a home for improved curb appeal.

Similarly, knowledge mined in real-time might lead an agent to recruit a new listing which had not previously been on the market… data can be compelling. What if an agent wants to track what her buyers have seen, or where they lingered longest, or how many documents still need to be reviewed in a pending transaction?

The Compass software manages the entire process. Best of all, it can be done on a phone with a few swipes, or back at the office on a desktop. The app is fully integrated.

Compass Chief Product Officer Greg Hart spent 23 years at Amazon, where he co-developed the Echo and Alexa voice assistants. Prior to joining Compass, Mr. Hart ran Amazon Prime Video. He is one of the architects of the Compass CRM platform, and his unique skillset gives me tremendous confidence in the company. Mr. Hart understands firsthand how a seamless user experience can galvanize usage and drive growth at scale.

The company’s August earnings call provided ample evidence of how the CRM platform is driving industry-leading success. Agents closed a record of 6.2 transactions in Q2, an increase of 140% YoY, and the value of those properties rose 186% YoY. Expenses declined 100 basis points as more agents join the platform, and the company was effectively able to leverage fixed costs across a higher number of users.

Management raised guidance in August and will report third quarter results on November 8. Consensus estimates call for revenues of $1.72B, implying growth of 47% YoY. I suspect estimates will prove low. For my analysis, I’ll play it conservatively and use consensus revenue estimates for 2022 of $7,880M. This generates my target of $44 if I simply apply a peer multiple of 2.23 times sales.

As a young company in a competitive market, Compass trades at just 0.65 times. I think that’s far too low. If I’m right about sales and valuation being too low, the stock could rise well above my $44 target. One final point, Softbank owns 35% of the company. That’s a strong endorsement. I also like seeing stock in strong hands.

I like owning Compass in the low teens, near recent support on the chart and slightly above the post-IPO low of $10.50. At the current price of $12.75, COMP trades at just 0.65 times estimated sales for 2022… that’s extremely cheap. My target of $44 represents a potential tripling in price.

I arrive at $44 by applying a peer multiple of 2.23 times 2022 estimated revenues of $7.88B (($7.88B x 2.23) / 395M shares outstanding = $44/share). I should note that this revenue estimate equals the current consensus estimate among the six analysts tracked by Bloomberg.

It implies growth of just 25% YoY, compared to 70% growth in 2021 over 2020. As such, I think it’s quite conservative and my target could be low. Were revenues to rise 50% to $9.46B for example, my implied target would be $53.

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