Critical Comparison: Compass Diversified (NYSE:CODI) versus Global Payments (NYSE:GPN)

Global Payments (NYSE:GPN) and Compass Diversified (NYSE:CODI) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, valuation, earnings, institutional ownership, analyst recommendations, risk and profitability.

Profitability

This table compares Global Payments and Compass Diversified’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Global Payments	-9.16%	13.80%	5.73%
Compass Diversified	-5.38%	-10.36%	-0.10%

Volatility and Risk

Global Payments has a beta of 0.78, indicating that its share price is 22% less volatile than the S&P 500. Comparatively, Compass Diversified has a beta of 1.26, indicating that its share price is 26% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent recommendations for Global Payments and Compass Diversified, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Global Payments	3	17	9	0	2.21
Compass Diversified	1	2	3	0	2.33

Global Payments currently has a consensus price target of $92.85, indicating a potential upside of 4.96%. Compass Diversified has a consensus price target of $16.50, indicating a potential upside of 49.23%. Given Compass Diversified’s stronger consensus rating and higher possible upside, analysts plainly believe Compass Diversified is more favorable than Global Payments.

Insider and Institutional Ownership

89.8% of Global Payments shares are owned by institutional investors. Comparatively, 72.7% of Compass Diversified shares are owned by institutional investors. 0.6% of Global Payments shares are owned by insiders. Comparatively, 1.6% of Compass Diversified shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Global Payments and Compass Diversified”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Global Payments	$7.71 billion	3.04	$1.40 billion	($2.98)	-29.68
Compass Diversified	$1.87 billion	0.44	-$226.41 million	($2.17)	-5.10

Global Payments has higher revenue and earnings than Compass Diversified. Global Payments is trading at a lower price-to-earnings ratio than Compass Diversified, indicating that it is currently the more affordable of the two stocks.

About Global Payments

Global Payments Inc. provides payment technology and software solutions for card, check, and digital-based payments in the Americas, Europe, and the Asia-Pacific. It operates through two segments, Merchant Solutions and Issuer Solutions. The Merchant Solutions segment offers authorization, settlement and funding, customer support, chargeback resolution, terminal rental, sales and deployment, payment security, and consolidated billing and reporting services. This segment also provides an array of enterprise software solutions that streamline business operations of its customers in various vertical markets; and value-added solutions and services, such as point-of-sale software, analytics and customer engagement, payroll and reporting, and human capital management. The Issuer Solutions segment offers solutions that enable financial institutions and retailers to manage their card portfolios through a platform; and commercial payments, account payables, and electronic payment alternatives solutions for businesses and governments. It markets its products and services through direct sales force, trade associations, agent and enterprise software providers, referral arrangements with value-added resellers, and independent sales organizations. The company was founded in 1967 and is headquartered in Atlanta, Georgia.

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.