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There isn't really one right answer. It is part of what makes combat squad such a powerful rule, as it allows you to deploy in large or small units depending on what you need.
In general, small units have several advantages. The first is that, assuming that they are a troops choice, 2 smaller units can capture 2 objectives, whereas an equally expensive large unit can only capture 1. The second relates to overkill. By having multiple small units, you are able to more precisely control how many bullets are shot at what. For example, if you have 2 squads of 5 grey hunters, they can fire at some target if they are both in range. Lets say that the first squad manages to kill all the enemy models, thats great, as the second squad can now fire at something else. If you were using one full sized squad however, you would still kill the squad, but the second 5 Grey Hunters shots would essentially be wasted on the target. The third is the inverse of the second, survivability. While MSU allows you to more readily prevent yourself from overkilling the enemy, it also makes the enemy more likely to overkill you. If an enemy shoots a squad of 10 Grey Hunters and inflicts 7 unsaved wounds, you loose 7 Grey Hunters. However, the same squad shooting at 2 groups of 5 GH will still net 7 unsaved wounds, but you'll only loose 5 GHs, as the remaining wounds will be lost to overkill. The forth advantage is you get more specialization out of your small squads. While more relevant with regular marines, who get 1 heavy and 1 special rather than 2 specials, combat squads allow a group of 5 marines to focus on one goal. For example, if you combat squad your GH so that 2 meltaguns are in one squad, you've created a decent anti-armor squad, and have 5 bolter marines who can act separately to deal with targets they can actually damage.
However, MSU also have several disadvantages. The first is that they are easier to kill, and thus make it easier for your opponents to get first blood (which has a large influence in many game types). The second is that while MSU have an easier time capturing objectives due to their ability to spread out, their small size makes it harder for them to hold them. Another disadvantage is morale tests. Although more noticeable for low-leadership armies, it is easier to force a smaller squad to take a morale check, which could take them out of the game for at least a turn, if not longer. A fourth disadvantage is that in KP games (1/6), MSU yields more KP. Additionally, squad size has several implications in combat. When you charge, you get a larger bonus for large squads since you now only get the +1 attack for the first squad to charge, and you also have more bodies to survive overwatch, meaning it is more likely that the charge will succeed. On the defense, more bodies means a more effective overwatch. Once in combat, having numbers means that you inflict more wounds, meaning that you will cause more casualties making it so that you are more likely to win the combat (that being said, sometimes in a shooty army you just want your charged unit to die so that you can shoot the enemy to death during your next turn).
So in short, there are reasons to take both MSU and single large units. Generally speaking, melee units want to be larger, while shooty mobile units want to be smaller, but there are exceptions. Assuming you play space wolves (since you mentioned them in your post) you will generally want to combat squad in every mission type except for Relic and the KP mission, or when you are playing one of the few armies where you are going to charge your opponents rather than wait for them to charge you (I'm thinking Codex Marines, some Necron builds, Tau, and maybe DA).
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