Analyzing Compass Diversified (NYSE:CODI) & Walker & Dunlop (NYSE:WD)

Compass Diversified (NYSE:CODI) and Walker & Dunlop (NYSE:WD) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, profitability, valuation, risk, dividends and analyst recommendations.

Risk and Volatility

Compass Diversified has a beta of 1.26, indicating that its share price is 26% more volatile than the S&P 500. Comparatively, Walker & Dunlop has a beta of 1.45, indicating that its share price is 45% more volatile than the S&P 500.

Insider & Institutional Ownership

72.7% of Compass Diversified shares are owned by institutional investors. Comparatively, 81.0% of Walker & Dunlop shares are owned by institutional investors. 1.6% of Compass Diversified shares are owned by company insiders. Comparatively, 4.0% of Walker & Dunlop shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Compass Diversified and Walker & Dunlop’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Compass Diversified	-5.38%	-10.36%	-0.10%
Walker & Dunlop	2.94%	7.25%	2.31%

Earnings and Valuation

This table compares Compass Diversified and Walker & Dunlop”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Compass Diversified	$1.87 billion	0.44	-$226.41 million	($2.17)	-5.08
Walker & Dunlop	$1.29 billion	1.02	$57.08 million	$1.12	34.04

Walker & Dunlop has lower revenue, but higher earnings than Compass Diversified. Compass Diversified is trading at a lower price-to-earnings ratio than Walker & Dunlop, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current recommendations for Compass Diversified and Walker & Dunlop, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Compass Diversified	1	2	3	0	2.33
Walker & Dunlop	1	0	5	0	2.67

Compass Diversified presently has a consensus price target of $16.50, indicating a potential upside of 49.66%. Walker & Dunlop has a consensus price target of $64.00, indicating a potential upside of 67.87%. Given Walker & Dunlop’s stronger consensus rating and higher probable upside, analysts clearly believe Walker & Dunlop is more favorable than Compass Diversified.

Summary

Walker & Dunlop beats Compass Diversified on 13 of the 14 factors compared between the two stocks.

About Compass Diversified

Compass Diversified is a private equity firm specializing in add on acquisitions, buyouts, industry consolidation, recapitalization, late stage and middle market investments. It seeks to invest in niche industrial or branded consumer companies, manufacturing, distribution, consumer products, business services sector, healthcare, safety & security, electronic components, food and foodservice. The firm prefers to invest in companies based in North America. It seeks to invest between $100 million and $800 million in companies with an EBITDA between $15 million to $80 million. It seeks to acquire controlling ownership interests in its portfolio companies and can make additional platform acquisitions. The firm prefer to have majority stake in companies. The firm invests through its balance sheet and typically holds investments between five to seven years. Compass Diversified was founded in 2006 and is based in Westport, Connecticut with an additional office in Costa Mesa, California.

About Walker & Dunlop

Walker & Dunlop, Inc. is a holding company, which engages in the provision of commercial real estate and finance services. It operates through the following segments: Capital Markets, Servicing and Asset Management, and Corporate. The Capital Markets segment offers a comprehensive range of commercial real estate finance products to customers. The Servicing and Asset Management segment includes servicing and asset-managing and managing third-party capital investments. The Corporate segment consists primarily of the company’s treasury operations and other corporate-level activities. The company was founded by Oliver Walker and Laird Dunlop in 1937 and is headquartered in Bethesda, MD.