Compass (COMP) AI Stock Analysis

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Compass

(NYSE:COMP)

59Neutral

Compass's stock score reflects a mixture of strong market momentum and strategic growth initiatives against a backdrop of financial recovery and profitability challenges. While technicals and corporate strategy are favorable, valuation concerns and financial stability weigh on the score.

Positive Factors

Financial Performance

COMP provided preliminary results above their previous outlook, with revenue better than +8% at the midpoint, and adj. EBITDA up by 230% at the midpoint.

Market Share and Growth Strategy

COMP continues to believe they can reach 30% market share in their top 30 markets, driven by M&A and organic growth.

Strategic Acquisitions

The recent Christie's acquisition and better than expected 4Q results have led to higher estimates for Compass Inc.

Negative Factors

Competitive Disadvantages

Clear co-operation ending could be an accelerator of market share consolidation for the industry, adding another competitive disadvantage for smaller brokerages.

Market Reflection

The stock isn't reflecting the benefits of the recently-closed Christie's acquisition or the ability to drive organic market share gains.

Compass (COMP) vs. S&P 500 (SPY)

Market Cap

$4.38B

Dividend YieldN/A

Average Volume (3M)6.78M

Price to Earnings (P/E)―

Beta (1Y)1.98

Revenue Growth15.23%

EPS Growth55.04%

CountryUS

Employees2,566

SectorReal Estate

Sector Strength79

IndustrySoftware - Application

Share Statistics

EPS (TTM)-0.31

Shares Outstanding517,671,300

10 Day Avg. Volume7,270,343

30 Day Avg. Volume6,781,288

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.86

Price to Cash Flow (P/CF)39.80

P/FCF Ratio39.80

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$10.58

Price Target Upside27.78% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering6

Compass Business Overview & Revenue Model

Company DescriptionCompass, Inc. is a technology-driven real estate brokerage firm that operates in the United States. The company focuses on providing a comprehensive platform that integrates technology with experienced real estate agents to offer a seamless home buying, selling, and renting experience. Compass aims to empower its agents with cutting-edge tools for market analysis, client relationship management, and property marketing, enhancing their ability to serve clients effectively across various real estate sectors.

How the Company Makes MoneyCompass makes money primarily through real estate brokerage commissions. When Compass agents facilitate the buying or selling of a property, the company earns a percentage of the transaction as a commission. This commission is split between Compass and the individual agent according to their agreement. Additionally, Compass generates revenue by offering various ancillary services such as mortgage brokerage, title, and escrow services, which complement the core real estate transactions. The company's advanced technology platform and data-driven insights also contribute to its competitive advantage, enabling it to attract top talent in the real estate industry and maintain strong client relationships.

Compass Financial Statement Overview

Summary

Compass shows signs of financial recovery with improved revenue and positive cash flow in 2024. Despite these improvements, persistent net losses, high leverage, and a declining equity base indicate underlying financial challenges. Continued focus on profitability and balance sheet strengthening is necessary for long-term stability.

Income Statement

Neutral

Compass has shown a fluctuating revenue trend with a recent increase of 15.23% from 2023 to 2024, indicating potential recovery. However, persistent negative net income and EBIT margins highlight ongoing profitability challenges. The gross profit margin improved to 17.67% in 2024, suggesting better cost management but still insufficient to cover operating expenses as reflected in the negative EBIT margin of -2.75%.

Balance Sheet

Negative

The company's balance sheet shows moderate leverage with a debt-to-equity ratio of 1.16. Stockholders' equity has declined over recent years, raising concerns about financial stability. The equity ratio of 34.75% indicates a heavy reliance on liabilities, while the negative return on equity underscores inefficiencies in generating profits from equity investments.

Cash Flow

Neutral

Cash flow has improved, with positive free cash flow of $105.8 million in 2024, a significant turnaround from negative figures in previous years. The operating cash flow to net income ratio is positive at 0.79, showing better conversion of income to cash. However, inconsistent cash flows in prior years pose ongoing concerns.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
5.63B	4.88B	6.02B	6.42B	3.72B
	Gross Profit
994.50M	553.00M	1.08B	1.11B	663.90M
	EBIT
-154.80M	-314.90M	-540.30M	-493.00M	-273.30M
	EBITDA
-77.90M	-216.40M	-500.30M	-428.50M	-220.10M
	Net Income Common Stockholders
-154.40M	-321.30M	-589.30M	-492.80M	-270.20M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
223.80M	166.90M	361.90M	618.30M	440.10M
	Total Assets
1.18B	1.16B	1.53B	1.80B	1.37B
	Total Debt
474.00M	533.90M	763.00M	580.70M	512.40M
	Net Debt
250.20M	367.00M	401.10M	-37.60M	72.30M
	Total Liabilities
765.60M	728.30M	1.01B	953.00M	741.30M
	Stockholders Equity
409.40M	428.70M	517.10M	843.80M	623.80M
Cash Flow		Free Cash Flow
105.80M	-37.10M	-361.80M	-78.70M	-101.40M
	Operating Cash Flow
121.50M	-25.90M	-291.70M	-28.60M	-58.10M
	Investing Cash Flow
-36.60M	-11.70M	-100.10M	-192.50M	-13.40M
	Financing Cash Flow
-28.00M	-157.40M	135.40M	399.30M	19.90M

Compass Technical Analysis

Technical Analysis Sentiment

Negative

Last Price8.28

Price Trends

50DMA

8.48

Negative

100DMA

7.48

Positive

200DMA

6.29

Positive

Market Momentum

MACD

0.18

Positive

RSI

47.64

Neutral

STOCH

28.51

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For COMP, the sentiment is Negative. The current price of 8.28 is below the 20-day moving average (MA) of 8.93, below the 50-day MA of 8.48, and above the 200-day MA of 6.29, indicating a neutral trend. The MACD of 0.18 indicates Positive momentum. The RSI at 47.64 is Neutral, neither overbought nor oversold. The STOCH value of 28.51 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for COMP.

Compass Risk Analysis

Compass disclosed 60 risk factors in its most recent earnings report. Compass reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Compass Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
EXPI	63 Neutral	$1.44B	―	-7.50%	2.11%	6.69%	-137.52%
Sector *	61 Neutral	$4.43B	16.13	-3.23%	11.37%	6.25%	-21.19%
COMP	59 Neutral	$4.38B	―	-36.85%	―	15.23%	55.04%
RDFN	58 Neutral	$1.30B	―	199.35%	―	-4.16%	-17.19%
RMAX	57 Neutral	$249.50M	22.37	1.69%	―	-5.52%	―
ZG	55 Neutral	$16.07B	―	-2.39%	―	14.96%	29.56%
OPEN	44 Neutral	$714.84M	―	-46.67%	―	-25.81%	-34.43%

* Real Estate Sector Average

Performance Comparison

COMP

Compass

8.28

4.38

112.31%

RMAX

Re/Max Holdings

7.91

-0.14

-1.74%

Zillow Group Class A

65.32

18.71

40.14%

EXPI

eXp World Holdings

9.48

-0.45

-4.53%

RDFN

Redfin

10.20

4.01

64.78%

OPEN

Opendoor Technologies

0.99

-1.70

-63.20%

Compass Earnings Call Summary

Earnings Call Date: Feb 18, 2025 | % Change Since: 3.76% | Next Earnings Date: May 7, 2025

Earnings Call Sentiment Positive

The earnings call highlights significant revenue growth, record adjusted EBITDA, and strong agent retention, alongside strategic acquisitions like Christie's International Real Estate. However, it also notes increased commission expenses and challenges from higher mortgage rates and regulatory issues. The positive aspects of growth and strategic positioning outweigh the mentioned challenges.

Highlights

Revenue Growth and Market Share Gains

Revenue in Q4 2024 increased by 25.9% year over year. Compass achieved a 65 basis points increase in market share, reaching 5.06%.

Record Adjusted EBITDA and Free Cash Flow

Q4 2024 adjusted EBITDA was $16.7 million, an improvement from a loss of $23.7 million a year ago, and free cash flow was $26.7 million, compared to a negative free cash flow of $41 million last year.

Agent Growth and Retention

Compass recruited 659 principal agents organically in Q4, with a strong agent retention rate of 96.9%. The net principal agent count grew by 21% year over year.

Title and Escrow Business Expansion

The attach rate in the title and escrow business improved by over 800 basis points year over year, nearly quadrupling profitability.

Christie's International Real Estate Acquisition

Acquisition of Christie's International Real Estate, expected to contribute $500 million in annual revenue with a 30% to 35% adjusted EBITDA margin.

Lowlights

Increased Commissions and Related Expenses

Commissions and related expenses as a percentage of revenue increased to 82.53% in Q4 2024, up by 82 basis points from the previous year.

Impact of Higher Mortgage Rates

Despite strong performance, the company acknowledges challenges due to higher mortgage rates and a volatile environment.

Regulatory and Competitive Challenges

Discussion on NAR's rules and the impact of structural changes on the brokerage industry, highlighting ongoing regulatory challenges.

Company Guidance

In the call detailing Compass, Inc.'s Q4 and full year 2024 financial results, the company provided guidance for Q1 and the full year 2025, highlighting several key metrics. Revenue for Q4 2024 increased by 25.9% to $1.38 billion, with adjusted EBITDA reaching $16.7 million, or $20.9 million when excluding $4.2 million in M&A transaction costs. The company reported a gross transaction value of $54 billion for Q4, reflecting a 29.2% increase from the previous year, with a total transaction increase of 24.1% year over year. Compass successfully recruited 659 principal agents organically during the quarter, with a retention rate of 96.9%. The guidance for Q1 2025 includes expected revenue ranging from $1.35 billion to $1.475 billion and adjusted EBITDA between $11 million and $25 million. For the full year 2025, Compass projects to maintain a 3% to 4% organic OpEx growth and aims to remain free cash flow positive, continuing to capitalize on its structural advantages and strategies such as the three-phase marketing approach to enhance market share and agent productivity.

Compass Corporate Events

Business Operations and StrategyFinancial Disclosures

Compass Raises Financial Outlook Amid Real Estate Challenges

Positive

Jan 15, 2025

On January 15, 2025, Compass, Inc. raised its financial outlook for the fourth quarter and full-year 2024, indicating robust performance despite a challenging real estate market. The company expects record Adjusted EBITDA and free cash flow, highlighting its operational efficiency and market resilience, as it prepares for the Needham Growth Conference.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.