Financial Contrast: Compass Diversified (NYSE:CODI) & Walker & Dunlop (NYSE:WD)

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

Volatility & Risk

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

Valuation & Earnings

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

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

Walker & Dunlop has higher earnings, but lower revenue 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.

Institutional & Insider Ownership

81.0% of Walker & Dunlop shares are held by institutional investors. Comparatively, 72.7% of Compass Diversified shares are held by institutional investors. 4.0% of Walker & Dunlop shares are held by company insiders. Comparatively, 1.6% of Compass Diversified shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

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

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

Analyst Recommendations

This is a summary of recent ratings and target prices for Walker & Dunlop and Compass Diversified, as reported by MarketBeat.

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

Walker & Dunlop presently has a consensus target price of $64.00, suggesting a potential upside of 67.87%. Compass Diversified has a consensus target price of $16.50, suggesting a potential upside of 49.66%. Given Walker & Dunlop’s stronger consensus rating and higher probable upside, analysts plainly 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 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.

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.