Leggett & Platt (LEG) versus Compass Diversified (CODI) Critical Analysis

Leggett & Platt (NYSE: LEG) and Compass Diversified (NYSE:CODI) are both consumer discretionary companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, earnings, valuation, dividends, risk, profitability and institutional ownership.

Profitability

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

Net Margins Return on Equity Return on Assets
Leggett & Platt 7.42% 29.44% 10.12%
Compass Diversified 2.20% 2.11% 0.97%



Dividends

Leggett & Platt pays an annual dividend of $1.44 per share and has a dividend yield of 3.2%. Compass Diversified pays an annual dividend of $1.44 per share and has a dividend yield of 8.7%. Leggett & Platt pays out 58.5% of its earnings in the form of a dividend. Leggett & Platt has increased its dividend for 46 consecutive years.

Institutional & Insider Ownership

73.7% of Leggett & Platt shares are held by institutional investors. Comparatively, 34.7% of Compass Diversified shares are held by institutional investors. 1.5% of Leggett & Platt shares are held by company insiders. Comparatively, 2.4% of Compass Diversified shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Risk & Volatility

Leggett & Platt has a beta of 0.87, meaning that its share price is 13% less volatile than the S&P 500. Comparatively, Compass Diversified has a beta of 0.48, meaning that its share price is 52% less volatile than the S&P 500.

Valuation & Earnings

This table compares Leggett & Platt and Compass Diversified’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Leggett & Platt $3.94 billion 1.49 $292.60 million $2.46 18.05
Compass Diversified $1.27 billion 0.78 $27.99 million N/A N/A

Leggett & Platt has higher revenue and earnings than Compass Diversified.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Leggett & Platt and Compass Diversified, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Leggett & Platt 0 3 3 0 2.50
Compass Diversified 0 0 1 0 3.00

Leggett & Platt presently has a consensus price target of $55.20, indicating a potential upside of 24.30%. Compass Diversified has a consensus price target of $20.00, indicating a potential upside of 20.48%. Given Leggett & Platt’s higher possible upside, equities analysts plainly believe Leggett & Platt is more favorable than Compass Diversified.

Summary

Leggett & Platt beats Compass Diversified on 11 of the 15 factors compared between the two stocks.

Leggett & Platt Company Profile

Leggett & Platt, Incorporated designs and produces various engineered components and products worldwide. It operates through four segments: Residential Products, Furniture Products, Industrial Products, and Specialized Products. The Residential Products segment offers innersprings, wire forms, and machines to shape wire into various types of springs; industrial sewing/finishing machines, conveyor lines, mattress packaging, and glue-drying equipment, as well as quilting machines; and structural fabrics, carpet cushions, and geo components. It serves manufacturers of finished bedding, upholstered furniture, packaging, filtration, and draperies; retailers and distributors of carpet cushions; and contractors, landscapers, road construction companies, and government agencies using geo components. The Furniture Products segment offers molded plywood components; bases, columns, back rests, control devices, and casters and frames; private-label finished furniture; beds and bed frames; adjustable beds; and steel mechanisms and hardware, and springs and seat suspensions. It serves upholstered and office furniture manufacturers; department stores and big box retailers; e-commerce retailers; and mattress and furniture retailers. The Industrial Products segment offers drawn wires, bedding and furniture components, automotive seat suspension systems, and steel rods. It serves packaging and baling companies, mechanical spring manufacturers, and wire distributors. The Specialized Products segment offers mechanical and pneumatic lumbar support and massage systems, seat suspension systems, motors and actuators, and cables; titanium, nickel, and stainless steel tubing, formed tube, and tube assemblies; and engineered hydraulic cylinders. It serves automobile and mobile equipment OEMs, and aerospace suppliers. The company sells its products through sales representatives and distributors. Leggett & Platt, Incorporated was founded in 1883 and is headquartered in Carthage, Missouri.

Compass Diversified Company Profile

Compass Diversified Holdings LLC is a private equity firm specializing in acquisitions, buyouts, industry consolidation, recapitalization, and middle market investments. It seeks to invest in niche industrial or branded consumer companies, manufacturing, distribution, consumer products, and business services sectors. The firm prefers to invest in companies based in North America. It seeks to invest between $100 million and $500 million in transaction size between $4 million and $500 million in companies with cash flows between $10 million and $450 million, enterprise values between $100 million and $500 million, and an EBITDA between $5 million and $75 million. It seeks to acquire controlling ownership interests in its portfolio companies and can also 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 Group Management LLC is the external manager of the Compass Diversified Holdings LLC and manages day-to-day business and operations of firm. Compass Diversified Holdings LLC was founded in 2005 and is based in Westport, Connecticut with an additional office in Irvine, California.

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