Compass Diversified has gotten torched over the last six months - since April 2025, its stock price has dropped 62.3% to $6.54 per share. This might have investors contemplating their next move.
Is there a buying opportunity in Compass Diversified, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free for active Edge members.
Why Is Compass Diversified Not Exciting?
Despite the more favorable entry price, we don't have much confidence in Compass Diversified. Here are three reasons we avoid CODI and a stock we'd rather own.
1. Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within financials, a stretched historical view may miss recent interest rate changes, market returns, and industry trends. Compass Diversified’s recent performance shows its demand has slowed as its annualized revenue growth of 1.6% over the last two years was below its five-year trend. 
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
2. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Compass Diversified’s EPS grew at an unimpressive 9.2% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 1.6% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
3. Previous Growth Initiatives Haven’t Paid Off Yet
Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.
Over the last five years, Compass Diversified has averaged an ROE of 1%, uninspiring for a company operating in a sector where the average shakes out around 10%.
Final Judgment
Compass Diversified isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 2.7× forward P/E (or $6.54 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better investments elsewhere. We’d recommend looking at one of our top digital advertising picks.
Stocks We Like More Than Compass Diversified
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
