The Compass Valuation Quandary

Compass' recent debut as a public company was a mixed bag. Of considerable note is the current valuation: $6.65 billion, compared to $6.4 billion when it last raised capital two years ago. The tiny gain brings up interesting questions: Why has Compass' valuation not increased more, and how does it compare to its peers?

Compass has a massive valuation, on par with Redfin and dwarfing Realogy. This analysis isn't about the valuation itself, but rather changes in value over time. Often, trends and momentum reveal more than absolute figures.

Between July 2019 and April 2021, many real estate and real estate tech stocks have seen massive gains, even traditional incumbents like Realogy and RE/MAX. However, Compass stands out with a tiny 4 percent gain in valuation over the past two years -- two years which has seen massive growth at the company across all metrics.

Compass has positioned itself on the cutting edge of real estate tech, promising to revolutionize the industry through unprecedented investments in technology. However, the company valuation has hardly budged in two years. Why the disparity?

The valuation discrepancy -- especially compared to its peers -- stands out loud and clear. Investors either significantly over-valued the company in its previous fundraising rounds, or are pessimistic about its growth prospects going forward.

Research note: Company valuations from July 2019 are taken from GCA Advisors research, and for 2021 are from April 8th. All valuations are a like-for-like "equity value." Opendoor's 2019 valuation is from March, the remainder from July 2019.