Compass Diversified (NYSE:CODI) shareholders might be concerned after seeing the share price drop 17% in the last quarter. But at least the stock is up over the last five years. In that time, it is up 47%, which isn't bad, but is below the market return of 143%.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

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Given that Compass Diversified didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

For the last half decade, Compass Diversified can boast revenue growth at a rate of 10% per year. That's a pretty good long term growth rate. While the share price has gained 8% per year for five years, that's hardly amazing considering the market also rose. You could even argue that the share price was over optimistic, previously.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Compass Diversified will earn in the future (free profit forecasts).

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Compass Diversified's TSR for the last 5 years was 98%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Compass Diversified shareholders are down 17% for the year (even including dividends), but the market itself is up 9.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 15% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Compass Diversified that you should be aware of.

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.