Is It The Right Time To Buy Compass Diversified Holdings LLC (NYSE:CODI)?

Compass Diversified Holdings LLC (NYSE:CODI), a diversified financial company based in United States, maintained its current share price over the past couple of month on the NYSE, with a relatively tight range of $16.35 to $17.55. However, does this price actually reflect the true value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Compass Diversified Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Compass Diversified Holdings

What is Compass Diversified Holdings worth?

The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 1.3x is currently trading slightly above its industry peers’ ratio of 1.22x, which means if you buy Compass Diversified Holdings today, you’d be paying a relatively fair price for it. And if you believe that Compass Diversified Holdings should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. In addition to this, it seems like Compass Diversified Holdings’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Compass Diversified Holdings generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. In Compass Diversified Holdings’s case, its revenues over the next few years are expected to grow by 39.32%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? CODI’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at CODI? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on CODI, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for CODI, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Compass Diversified Holdings. You can find everything you need to know about Compass Diversified Holdings in the latest infographic research report. If you are no longer interested in Compass Diversified Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.