Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Compass Diversified Holdings LLC (CODI - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Compass Diversified has a trailing twelve months PE ratio of 19.15. This level is slightly less than the market at large, as the PE ratio for the S&P 500 comes in at about 19.84.
If we focus on the stock’s long-term PE trend, the current level puts Compass Diversified’s current PE ratio at about its median level (which stands at 19.68). However, it is worth noting that the company has seen huge volatility in its PE since 2014. Nevertheless, currently the company’s PE seems quite stable and could make for a probable entry point in the stock.
COMPASS DIVERSF PE Ratio (TTM)
However, the stock’s PE compares unfavorably with the Zacks classified Finance sector’s trailing twelve months PE ratio, which stands at 15.95. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
We should also point out that Compass Diversified has a forward PE ratio (price relative to this year’s earnings) of just 12.65, so it is fair to say that a slightly more value-oriented path may be ahead for Compass Diversified stock in the near term.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Compass Diversified has a P/S ratio of about 1.05. This is a much lower than the S&P 500 average, which comes in at 2.97 right now. However, as we can see in the chart below, this is well above the highs for this stock in particular over the past few years.
CODI is actually in the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Compass Diversified currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Compass Diversified a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Compass Diversified is just 1.81, a level that is considerably lower than the industry average of 2.24. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 14.41, while the industry’s average stands at a negative 4.37. Thus, while the industry is experiencing negative cash flows, CODI’s financial health seems much better. Clearly, CODI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Compass Diversified might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘C’ and a Momentum score of ‘F’. This gives AAPL a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen two estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen three upward revisions and two downward in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has remained constant in the past two months, while the full year estimate has inched higher by 0.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
COMPASS DIVERSF Price and Consensus
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Compass Diversified is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, though the solid Industry Rank (Top 8% out of more than 250 industries) warrants attention right now, a medium ranking (Zacks Rank #3) somewhat dims the sparkle. So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Compass Diversified Holdings LLC (CODI - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Compass Diversified has a trailing twelve months PE ratio of 19.15. This level is slightly less than the market at large, as the PE ratio for the S&P 500 comes in at about 19.84.
If we focus on the stock’s long-term PE trend, the current level puts Compass Diversified’s current PE ratio at about its median level (which stands at 19.68). However, it is worth noting that the company has seen huge volatility in its PE since 2014. Nevertheless, currently the company’s PE seems quite stable and could make for a probable entry point in the stock.
COMPASS DIVERSF PE Ratio (TTM)
However, the stock’s PE compares unfavorably with the Zacks classified Finance sector’s trailing twelve months PE ratio, which stands at 15.95. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
We should also point out that Compass Diversified has a forward PE ratio (price relative to this year’s earnings) of just 12.65, so it is fair to say that a slightly more value-oriented path may be ahead for Compass Diversified stock in the near term.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Compass Diversified has a P/S ratio of about 1.05. This is a much lower than the S&P 500 average, which comes in at 2.97 right now. However, as we can see in the chart below, this is well above the highs for this stock in particular over the past few years.
CODI is actually in the higher zone of its trading range in the time period per the P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Compass Diversified currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Compass Diversified a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Compass Diversified is just 1.81, a level that is considerably lower than the industry average of 2.24. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 14.41, while the industry’s average stands at a negative 4.37. Thus, while the industry is experiencing negative cash flows, CODI’s financial health seems much better. Clearly, CODI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Compass Diversified might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘C’ and a Momentum score of ‘F’. This gives AAPL a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen two estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen three upward revisions and two downward in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has remained constant in the past two months, while the full year estimate has inched higher by 0.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
COMPASS DIVERSF Price and Consensus
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Compass Diversified is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, though the solid Industry Rank (Top 8% out of more than 250 industries) warrants attention right now, a medium ranking (Zacks Rank #3) somewhat dims the sparkle. So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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