Critical Analysis: Compass Diversified (NYSE:CODI) and Flywire (NASDAQ:FLYW)

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

Analyst Recommendations

This is a breakdown of current recommendations for Flywire and Compass Diversified, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Flywire	0	7	8	0	2.53
Compass Diversified	1	2	3	0	2.33

Flywire presently has a consensus price target of $20.23, suggesting a potential upside of 13.98%. Compass Diversified has a consensus price target of $16.50, suggesting a potential upside of 50.78%. Given Compass Diversified’s higher probable upside, analysts plainly believe Compass Diversified is more favorable than Flywire.

Volatility and Risk

Flywire has a beta of 1.3, indicating that its stock price is 30% more volatile than the S&P 500. Comparatively, Compass Diversified has a beta of 1.26, indicating that its stock price is 26% more volatile than the S&P 500.

Institutional & Insider Ownership

95.9% of Flywire shares are held by institutional investors. Comparatively, 72.7% of Compass Diversified shares are held by institutional investors. 5.0% of Flywire shares are held by company insiders. Comparatively, 1.6% of Compass Diversified shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Flywire and Compass Diversified”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Flywire	$623.03 million	3.47	$13.50 million	$0.26	68.27
Compass Diversified	$1.87 billion	0.44	-$226.41 million	($2.17)	-5.04

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Flywire	4.77%	4.08%	2.81%
Compass Diversified	-5.38%	-10.36%	-0.10%

Summary

Flywire beats Compass Diversified on 12 of the 14 factors compared between the two stocks.

About Flywire

Flywire Corporation, together with its subsidiaries, operates as a payments enablement and software company in the United States and internationally. Its payment platform and network, and vertical-specific software help clients to get paid and help their customers to pay. The company’s platform facilitates payment flows across multiple currencies, payment types, and payment options, as well as provides direct connections to alternative payment methods, such as Alipay, Boleto, PayPal/Venmo, and Trustly. It serves education, healthcare, travel, and business to business organizations. The company was formerly known as peerTransfer Corporation and changed its name to Flywire Corporation in December 2016. Flywire Corporation was incorporated in 2009 and is headquartered in Boston, Massachusetts.

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.