Head to Head Comparison: CM Finance (CMFN) & Compass Diversified Holdings (NYSE:CODI)
Compass Diversified Holdings (NYSE: CODI) and CM Finance (NASDAQ:CMFN) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, earnings, profitabiliy, dividends, risk and institutional ownership.
This is a breakdown of recent ratings and target prices for Compass Diversified Holdings and CM Finance, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Compass Diversified Holdings||0||0||4||0||3.00|
Compass Diversified Holdings currently has a consensus price target of $19.00, suggesting a potential upside of 7.34%. Given Compass Diversified Holdings’ stronger consensus rating and higher probable upside, research analysts plainly believe Compass Diversified Holdings is more favorable than CM Finance.
Volatility & Risk
Compass Diversified Holdings has a beta of 0.57, suggesting that its stock price is 43% less volatile than the S&P 500. Comparatively, CM Finance has a beta of 1.42, suggesting that its stock price is 42% more volatile than the S&P 500.
This table compares Compass Diversified Holdings and CM Finance’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Compass Diversified Holdings||4.50%||9.18%||4.60%|
Institutional and Insider Ownership
37.3% of Compass Diversified Holdings shares are owned by institutional investors. Comparatively, 42.2% of CM Finance shares are owned by institutional investors. 2.4% of Compass Diversified Holdings shares are owned by insiders. Comparatively, 1.8% of CM Finance shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
Compass Diversified Holdings pays an annual dividend of $1.44 per share and has a dividend yield of 8.1%. CM Finance pays an annual dividend of $1.00 per share and has a dividend yield of 9.9%. Compass Diversified Holdings pays out 423.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. CM Finance pays out 60.2% of its earnings in the form of a dividend. CM Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.
Valuation & Earnings
This table compares Compass Diversified Holdings and CM Finance’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Compass Diversified Holdings||$1.08 billion||0.98||$175.69 million||$0.34||52.06|
Compass Diversified Holdings has higher revenue and earnings than CM Finance. CM Finance is trading at a lower price-to-earnings ratio than Compass Diversified Holdings, indicating that it is currently the more affordable of the two stocks.
CM Finance beats Compass Diversified Holdings on 8 of the 14 factors compared between the two stocks.
Compass Diversified Holdings Company Profile
Compass Diversified Holdings (the Trust) and Compass Group Diversified Holdings, LLC, (the Company), acquires and manages small and middle-market businesses. The Company operates through segments include Acquisition Corp. (5.11 Tactical), The Ergo Baby Carrier, Inc. (Ergobaby), Liberty Safe and Security Products, Inc. (Liberty), Fresh Hemp Foods Ltd. (Manitoba Harvest), Compass AC Holdings, Inc. (ACI), AMT Acquisition Corporation (Arnold), Clean Earth Holdings, Inc. (Clean Earth), and Sterno Products, LLC (Sterno) segments. The Company categorizes the businesses into separate groups of businesses, such as branded consumer businesses and niche industrial businesses. The Company also owns a non-controlling interest in Fox Factory Holding Corp. (FOX). Compass Group Management LLC, (CGM or the Manager), manages the day to day operations of the Company and oversees the management and operations of its businesses pursuant to a management services agreement (MSA).
CM Finance Company Profile
CM Finance Inc is an externally managed, non-diversified closed-end management investment company. The Company is a specialty finance company that invests primarily in the debt of the United States middle-market companies. The Company’s primary investment objective is to maximize total return to stockholders in the form of current income and capital appreciation by investing in debt and related equity of privately held lower middle-market companies. As of June 30, 2016, the Company’s portfolio consisted of debt and equity investments in 22 portfolio companies. It invests in unitranche loans and standalone second and first lien loans, with an emphasis on floating rate debt. It also selectively invests in mezzanine loans/structured equity and in the equity of portfolio companies through warrants and other instruments.CM Investment Partners LLC is an external investment advisor of the Company.
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