Is It Too Late to Consider Compass After Its 379% Three Year Surge?

• If you are wondering whether Compass is still a smart buy after its big recovery, or if most of the upside is already priced in, this article will walk through what the current share price really implies.
• After a small pullback of 0.2% over the last week, Compass is still up 14.9% over the past month, 85.2% year to date, and 379.5% over three years, which signals that market sentiment around the stock has shifted.
• Much of that shift has been driven by news that Compass is doubling down on its tech enabled brokerage model and expanding its agent platform. Management has emphasized tools that help agents win more listings in tight housing markets. Investors have also reacted to headlines about cost discipline and a more selective growth strategy, which together suggest the business is trying to balance scale with a clearer path to sustainable profitability.
• Even after that strong run, Compass scores a 4/6 valuation check. This indicates the market may not be fully pricing in its fundamentals yet. Next, we will break down what different valuation methods say about that, before finishing with a more intuitive way to think about what the stock might be worth.

Compass delivered 79.6% returns over the last year. See how this stacks up to the rest of the Real Estate industry.

Approach 1: Compass Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model projects a company’s future cash flows and then discounts them back to today, aiming to estimate what the entire business is worth in today’s dollars.

For Compass, the latest twelve months Free Cash Flow is about $182 million, and analysts expect this to rise steadily as the agent platform scales. The 2 Stage Free Cash Flow to Equity model used here combines analyst forecasts for the next few years with longer term projections generated by Simply Wall St, reaching an estimated $648 million of Free Cash Flow by 2035 as growth gradually slows.

When all those future cash flows are discounted back to today, the model arrives at an intrinsic value of about $14.81 per share. That is roughly 27.5% above the current share price, indicating that the market valuation is below the model’s estimate of Compass’s projected cash generation.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Compass is undervalued by 27.5%. Track this in your watchlist or portfolio, or discover 918 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Compass.

Approach 2: Compass Price vs Sales

For companies like Compass that are still building consistent profitability, the price to sales ratio is often a better yardstick than earnings based multiples because it focuses on how much investors are paying for each dollar of revenue rather than volatile or negative earnings.

In general, higher growth and lower risk justify a higher price to sales multiple, while slower growth or more uncertainty usually mean a lower, more conservative ratio is appropriate. Compass currently trades on a price to sales multiple of about 0.90x, which is well below both the Real Estate industry average of roughly 2.15x and the peer group average of about 2.12x.

Simply Wall St’s Fair Ratio framework goes a step further by estimating what a reasonable multiple should be for Compass specifically, based on its growth outlook, profitability profile, risk factors, industry and size. On that basis, Compass’s Fair Ratio is around 0.73x, suggesting that, after adjusting for its particular characteristics, the stock deserves a lower multiple than the typical peer, but still somewhat below where it trades today.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1460 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Compass Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, a simple way to connect your view of Compass’s story to a set of numbers. Narratives turn your assumptions about future revenue, earnings and margins into a financial forecast, link that forecast to a Fair Value, and then compare it to today’s share price so you can quickly see whether your story says buy, hold or sell. All of this happens inside the Simply Wall St Community page, where Narratives update automatically as new news or earnings arrive.

For example, one investor might build a bullish Compass Narrative around rapid AI driven agent productivity, margin expansion and a Fair Value above the current price. Another might create a more cautious Narrative that stresses commission pressure, integration risk and slower growth, leading to a much lower Fair Value. This range of clearly quantified perspectives helps you understand not just what you believe Compass is worth, but why, and how that compares to what other investors are assuming.

Do you think there's more to the story for Compass? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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