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Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation. Compass Diversified Holdings's forward rate of return for was 20.14%.
The historical rank and industry rank for Compass Diversified Holdings's Forward Rate of Return (Yacktman) % or its related term are showing as below:
During the past 13 years, Compass Diversified Holdings's highest Forward Rate of Return was 27.63. The lowest was -13.92. And the median was 5.34.
Unlike the Earnings Yield %, the Forward Rate of Return uses the normalized Free Cash Flow of the past seven years, and considers growth. The forward rate of return can be thought of as the return that investors buying the stock today can expect from it in the future.
The historical data trend for Compass Diversified Holdings's Forward Rate of Return (Yacktman) % can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
For the Conglomerates subindustry, Compass Diversified Holdings's Forward Rate of Return (Yacktman) %, along with its competitors' market caps and Forward Rate of Return (Yacktman) % data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
For the Conglomerates industry and Industrials sector, Compass Diversified Holdings's Forward Rate of Return (Yacktman) % distribution charts can be found below:
* The bar in red indicates where Compass Diversified Holdings's Forward Rate of Return (Yacktman) % falls into.
Forward Rate of Return is a concept that Don Yacktman uses in his investment approach. Yacktman explained the forward rate of return concept in detail in his interview with GuruFocus. Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation. He said in the interview (March 2012, when the S&P 500 was at about 1400):
If the business is stable, this calculation is fairly straightforward. For instance, on the S&P 500 we would normalize earnings. We would then calculate what percentage of those earnings are not reinvested in the underlying businesses and are therefore free. Historically, for the S&P 500, this has been just under 50% of earnings. Currently, we expect the S&P to earn about 70 on a normalized basis, a number which is far below reported earnings due to our adjusting for record high profit margins. $70 X ½ / 1400 gives you a normalized free cash flow yield of approximately 2.5%.
The historical real growth rate of the S&P 500 (companies) is about 1.5%. Assuming an inflation rate of 2.5%, the forward rate of return on an investment in the S&P 500 is about 6.5% today (2.5% free cash flow yield plus 1.5% real growth plus 2.5% inflation).
Compass Diversified Holdings's Forward Rate of Return of Dec. 2023 is
Forward Rate of Return | = | Normalized Free Cash Flow | / | Price | + | 5-Year EBITDA Growth Rate |
= | 0.816 | / | 22.45 | + | 0.1651 | |
= | 20.14 % |
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Compass Diversified Holdings (NYSE:CODI) Forward Rate of Return (Yacktman) % Explanation
Unlike the Earnings Yield, the Forward Rate of Return uses the normalized Free Cash Flow of the past five years, and considers growth. The forward rate of return can be thought of as the return that investors buying the stock today can expect from it in the future.
For the growth part of the Forward Rate of Return calculation, GuruFocus uses the 5-year average growth rate of EBITDA per share as the growth rate, and the growth rate is always capped at 20%. For the Free Cash Flow we use per share data averaged over five years. The reason we use five years is to make it comparable to the growth rate.
Be Aware
In the Forward Rate of Return calculation, the growth rate is added directly to today's free cash flow yield. Therefore the calculation is reliable only if the company can grow at the same rate in the future as it did in the past. Investors should pay close attention to this when researching growth stocks. A more accurate measurement for return is Return on Capital.
Thank you for viewing the detailed overview of Compass Diversified Holdings's Forward Rate of Return (Yacktman) % provided by GuruFocus.com. Please click on the following links to see related term pages.
Ryan J Faulkingham | other: See Remark (a) | SIXTY ONE WILTON ROAD, SECOND FLOOR, WESTPORT CT 06880 |
Harold S Edwards | other: See Remark (a) | SIXTY ONE WILTON ROAD, SECOND FLOOR, WESTPORT CT 06880 |
Teri Shaffer | other: See Remark (a) | 301 RIVERSIDE AVENUE, SECOND FLOOR, WESTPORT CT 06880 |
Nancy Mahon | other: See Remark (a) | C/O TPG PACE BENEFICIAL FINANCE CORP., 301 COMMERCE STREET, SUITE 3300, FORT WORTH TX 76102 |
Alexander S. Bhathal | other: See Remark (a) | 301 RIVERSIDE AVENUE, SECOND FLOOR, WESTPORT CT 06880 |
James Bottiglieri | other: See Remark (a) | 2187 ATLANTIC ST, STAMFORD CT 06902 |
Larry L Enterline | other: See Remark (a) | 2709 WATER RIDGE PARKWAY, 2ND FLOOR, CHARLOTTE NC 28217 |
Gordon M Burns | other: See Remark (a) | AZTAR CORPORATION, 2390 E. CAMELBACK RD., SUITE 400, PHOENIX AZ 85016 |
Compass Group Investments, Ltd. | 10 percent owner | BELVEDERE BUILDING, 69 PITTS BAY ROAD, HAMILTON HM 08 D0 00000 |
Patrick A Maciariello | other: See Remarks (a) | 301 RIVERSIDE AVENUE, SECOND FLOOR, WESTPORT CT 06880 |
Elias Sabo | other: See Remarks (a) | 2709 WATER RIDGE PARKWAY, 2ND FLOOR, CHARLOTTE NC 28217 |
Simon Heidi Locke | other: See Remark (a) | 26 KENSETT LANE, DARIEN CT 06820 |
Sarah Gaines Mccoy | other: See Remark (a) | 6300 MERRILL CREEK PARKWAY, SUITE B, EVERETT WA 98203-5862 |
C Sean Day | other: See Remark (a) | |
D Eugene Ewing | other: See Remark (a) | SIXTY ONE WILTON ROAD, SECOND FLOOR, WESTPORT CT 06880 |
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