Essent Group (NYSE:ESNT) vs. Compass Diversified (NYSE:CODI) Financial Analysis

Compass Diversified (NYSE:CODI) and Essent Group (NYSE:ESNT) are both finance companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, institutional ownership, risk, earnings, analyst recommendations, dividends and profitability.

Insider and Institutional Ownership

72.7% of Compass Diversified shares are held by institutional investors. Comparatively, 93.0% of Essent Group shares are held by institutional investors. 1.6% of Compass Diversified shares are held by company insiders. Comparatively, 3.6% of Essent Group shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility & Risk

Compass Diversified has a beta of 1.3, indicating that its share price is 30% more volatile than the S&P 500. Comparatively, Essent Group has a beta of 0.76, indicating that its share price is 24% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Compass Diversified	-5.38%	-10.36%	-0.10%
Essent Group	51.45%	11.91%	9.09%

Earnings & Valuation

This table compares Compass Diversified and Essent Group”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Compass Diversified	$1.87 billion	0.44	-$226.41 million	($2.17)	-5.09
Essent Group	$1.26 billion	4.43	$689.97 million	$7.17	8.67

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

Analyst Ratings

This is a breakdown of recent ratings for Compass Diversified and Essent Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Compass Diversified	1	2	4	0	2.43
Essent Group	0	6	3	0	2.33

Compass Diversified currently has a consensus price target of $17.00, indicating a potential upside of 53.80%. Essent Group has a consensus price target of $71.14, indicating a potential upside of 14.48%. Given Compass Diversified’s stronger consensus rating and higher probable upside, analysts plainly believe Compass Diversified is more favorable than Essent Group.

Summary

Essent Group beats Compass Diversified on 9 of the 14 factors compared between the two stocks.

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.

About Essent Group

Essent Group Ltd., through its subsidiaries, provides private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Its mortgage insurance products include primary, pool, and master policy. The company also provides information technology maintenance and development services; customer support-related services; underwriting consulting; and contract underwriting services, as well as risk management products and title insurance and settlement services. It serves the originators of residential mortgage loans, such as regulated depository institutions, mortgage banks, credit unions, and other lenders. Essent Group Ltd. was incorporated in 2008 and is based in Hamilton, Bermuda.