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Compass Diversified Holdings (CODI)
NYSE:CODI
US Market

Compass Diversified Holdings (CODI) AI Stock Analysis

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Compass Diversified Holdings

(NYSE:CODI)

64Neutral
Compass Diversified Holdings shows a mixed picture with solid financial performance in some areas while facing challenges with leverage and cash flows. Positive earnings call sentiment and strategic moves provide a promising outlook. However, technical analysis and valuation aspects are less favorable, impacting the overall attractiveness of the stock.
Positive Factors
Earnings Growth
Compass Diversified reported a beat and raise 3Q with adjusted earnings per share of $0.64, ahead of estimates, primarily due to stronger revenue growth.
Portfolio Management
Compass Diversified offers public shareholders an opportunity to own a portfolio of actively managed businesses with compelling attributes.
Negative Factors
Trade Uncertainty
Trade uncertainty could pressure large orders in the niche industrials segment, while subsidiaries including Honey Pot and Sterno have exposure to mass channel retail.

Compass Diversified Holdings (CODI) vs. S&P 500 (SPY)

Compass Diversified Holdings Business Overview & Revenue Model

Company DescriptionCompass Diversified Holdings engages in managing a group of small and middle-market businesses headquartered in North America. It operates through the following segments: Advanced Circuits, Liberty Safe, Ergobaby, Arnold, Clean Earth, Sterno, Manitoba Harvest, 5.11, and Crosman. The 5.11 segment is involved in the design and marketing of purpose-built tactical apparel and gear serving a wide range of global customers. The Advanced Circuits segment manufacture of quick-turn, small-run and production rigid printed circuit boards. Arnold Magnetic Technologies segment manufactures engineered magnetic solutions for a wide range of specialty applications and end-markets. The Clean Earth segment provides environmental services for a variety of contaminated materials including soils, dredged material, hazardous waste and drill cuttings. The Crosman segment engages in the design, manufacture, and marketing of airguns, archery products, optics and related accessories. The Liberty Safe segment produces premium home and gun safes. The Manitoba Harvest segment refers to the manufacture and marketing of branded, hemp-based food products. The Sterno Products segment pertians to the manufacture and marketing of portable food warming fuels and creative ambience solutions for the hospitality and consumer markets. The company was founded on November 18, 2005 and is headquartered in Westport, CT.
How the Company Makes MoneyCompass Diversified Holdings makes money primarily through the acquisition, ownership, and management of a diverse portfolio of middle-market businesses. The company generates revenue by leveraging the operational performance of its subsidiaries, which operate across various sectors, including consumer and industrial markets. CODI earns income through dividends and distributions from these subsidiaries, as well as through capital appreciation realized upon the sale of its holdings. Additionally, the company may engage in strategic partnerships and agreements that enhance the market positioning and profitability of its portfolio companies, contributing to its overall earnings.

Compass Diversified Holdings Financial Statement Overview

Summary
Compass Diversified Holdings shows strength in gross profitability and a balanced equity structure, but faces challenges with high leverage, low ROE, and negative cash flows. While revenue growth is present, the company's ability to improve net income and cash generation remains a key area for improvement. The firm's financial health is stable but requires attention to leverage and cash flow management to enhance shareholder value.
Income Statement
72
Positive
The company shows a strong gross profit margin at 45.5% for 2024, indicating solid profitability from core operations. However, the net profit margin is low at 1.9%, reflecting challenges in translating revenue into net income. Revenue growth from 2023 to 2024 is modest at 6.8%, marked by fluctuating EBIT margins over recent years, currently at 10.5%.
Balance Sheet
68
Positive
With a debt-to-equity ratio of 1.37, the company has relatively high leverage, which could pose risks in volatile market conditions. The return on equity (ROE) is low at 3.3%, indicating limited profitability for shareholders. The equity ratio is reasonably healthy at 32.0%, suggesting a balanced capital structure.
Cash Flow
55
Neutral
The company faces challenges with negative free cash flow of -$129.33 million in 2024, a decrease from positive figures in 2023. Operating cash flow to net income ratio is negative, indicating difficulties in converting net income into cash flow. These factors highlight concerns over sustainability of cash flows.
Breakdown
Dec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
2.20B2.06B2.26B1.84B1.56B
Gross Profit
1.00B893.32M907.74M725.96M562.78M
EBIT
230.13M90.07M175.57M139.50M94.83M
EBITDA
341.85M236.13M253.82M249.70M145.72M
Net Income Common Stockholders
12.81M246.29M36.39M24.86M22.78M
Balance SheetCash, Cash Equivalents and Short-Term Investments
59.73M450.48M61.27M157.13M70.74M
Total Assets
4.05B3.82B3.85B3.14B2.60B
Total Debt
1.77B1.67B1.83B1.28B899.46M
Net Debt
1.71B1.22B1.77B1.13B828.72M
Total Liabilities
2.49B2.30B2.49B1.86B1.38B
Stockholders Equity
1.30B1.33B1.14B1.11B1.10B
Cash FlowFree Cash Flow
-124.34M22.30M-92.56M94.17M117.86M
Operating Cash Flow
-67.64M78.08M-28.29M134.05M148.63M
Investing Cash Flow
-422.45M570.50M-626.73M-317.50M-700.83M
Financing Cash Flow
100.61M-260.16M556.88M273.21M521.73M

Compass Diversified Holdings Technical Analysis

Technical Analysis Sentiment
Negative
Last Price19.44
Price Trends
50DMA
20.94
Negative
100DMA
21.70
Negative
200DMA
21.48
Negative
Market Momentum
MACD
-0.48
Positive
RSI
39.68
Neutral
STOCH
16.49
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CODI, the sentiment is Negative. The current price of 19.44 is below the 20-day moving average (MA) of 20.39, below the 50-day MA of 20.94, and below the 200-day MA of 21.48, indicating a bearish trend. The MACD of -0.48 indicates Positive momentum. The RSI at 39.68 is Neutral, neither overbought nor oversold. The STOCH value of 16.49 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CODI.

Compass Diversified Holdings Risk Analysis

Compass Diversified Holdings disclosed 46 risk factors in its most recent earnings report. Compass Diversified Holdings reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Compass Diversified Holdings Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
77
Outperform
$4.98B9.6119.26%5.28%51.80%12.05%
76
Outperform
$14.50B8.7212.40%8.96%19.95%-10.57%
73
Outperform
$3.89B10.669.40%11.31%16.10%-24.30%
67
Neutral
$1.10B15.718.57%10.60%4.85%-37.38%
64
Neutral
$1.46B-4.98%5.14%6.77%9.95%
61
Neutral
$8.21B13.221.07%3.07%3.78%-16.88%
53
Neutral
$455.77M27.713.28%13.04%-66.59%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
CODI
Compass Diversified Holdings
19.44
-2.83
-12.71%
CSWC
Capital Southwest
21.69
0.44
2.07%
GBDC
Golub Capital Bdc
14.67
0.62
4.41%
MAIN
Main Street Capital
56.26
13.78
32.44%
PNNT
Pennantpark Investment
6.98
1.20
20.76%
ARCC
Ares Capital
21.28
2.97
16.22%

Compass Diversified Holdings Earnings Call Summary

Earnings Call Date: Feb 27, 2025 | % Change Since: -3.38% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
Compass Diversified demonstrated strong financial performance with significant growth in key sectors such as consumer verticals and notable achievements in strategic acquisitions. However, challenges in the industrial segment and regulatory impacts on 5.11 present areas for concern. Despite geopolitical risks, the company's proactive measures and strong balance sheet position it well for future growth.
Highlights
Strong Financial Performance
For the full year 2024, Compass Diversified achieved double-digit sales growth and increased adjusted EBITDA by over 30%, with growth accelerating in the fourth quarter.
Successful M&A Activity
Acquired The Honey Pot, a business in the feminine hygiene market, and Lifoam, enhancing their presence in temperature-controlled packaging. Divested Ergobaby and Crosman to streamline operations.
Shareholder Value Initiatives
Raised over $115 million in preferred equity and bought back more than 400,000 shares of common stock, demonstrating a strong commitment to shareholder value.
Consumer Vertical Growth
The consumer vertical saw pro forma revenues grow double digits with adjusted EBITDA increasing by over 27%, even excluding a $12 million inventory write-down.
Lugano's Exceptional Growth
Lugano delivered annual sales growth of more than 50% and adjusted EBITDA increased by 76.4%.
BOA's Strong Performance
BOA achieved more than 20% revenue growth and over 30% adjusted EBITDA growth for the full year.
Lowlights
PFAS Regulatory Impact
5.11 faced significant challenges due to PFAS regulations, resulting in a $12 million inventory write-down.
Modest Industrial Segment Performance
The industrial segment experienced flat sales and a modest decline in adjusted EBITDA, though performance improved in Q4.
Geopolitical and Tariff Risks
Potential macroeconomic impact due to tariffs and trade tensions, with exposure to Mexico and Canada posing risks despite mitigation strategies.
Company Guidance
During Compass Diversified's 2024 earnings call, the company highlighted a robust financial performance, achieving more than 30% growth in adjusted EBITDA for the full year and double-digit sales growth. The fourth quarter saw an acceleration in both revenue and adjusted EBITDA, surpassing expectations. Key strategic moves included the acquisition of Honey Pot and Lifoam, as well as the divestiture of Ergobaby and the Crosman airgun business to refine their focus on innovative and disruptive markets. They raised over $115 million in preferred equity to improve their capital structure, reducing their leverage ratio to 3.58x. Looking forward, Compass Diversified anticipates a stable outlook for 2025, with a CODI Momentum Index reading of 1.06, reflecting a steady economic environment. They project consolidated subsidiary adjusted EBITDA between $570 million and $610 million, with significant contributions expected from their branded consumer vertical, which is forecasted to achieve adjusted EBITDA between $440 million and $465 million.

Compass Diversified Holdings Corporate Events

Stock BuybackDividendsBusiness Operations and StrategyFinancial Disclosures
Compass Diversified Holdings Reports Strong 2024 Financial Results
Positive
Feb 27, 2025

Compass Diversified Holdings reported strong financial results for the fourth quarter and full year of 2024, driven by double-digit sales growth and a significant increase in adjusted EBITDA. The company saw accelerated growth in both its consumer and industrial businesses, with notable sales increases attributed to acquisitions and strong performance from subsidiaries like Lugano and BOA. CODI’s strategic actions included the sale of Ergobaby, issuance of preferred shares, and repurchasing of common shares, which have bolstered its financial position. The company also declared cash distributions for its common and preferred shares, reflecting its robust earnings and profit expectations. Looking ahead to 2025, CODI anticipates continued growth in adjusted EBITDA and earnings, supported by its current subsidiaries.

Executive/Board ChangesShareholder MeetingsBusiness Operations and Strategy
Compass Diversified Announces Director Retirement in 2025
Neutral
Feb 19, 2025

On February 19, 2025, Compass Diversified Holdings announced the upcoming retirement of James J. Bottiglieri, a long-serving director since 2005, following the 2025 annual shareholders meeting. Bottiglieri’s retirement, which was not due to any disagreement, marks the culmination of a strategic effort to refine the board’s leadership as the company continues to seek growth opportunities. CEO Elias Sabo and Board Chair Larry Enterline praised Bottiglieri’s contributions, highlighting his integral role in CODI’s financial transparency and leadership development.

Private Placements and FinancingM&A TransactionsBusiness Operations and StrategyFinancial Disclosures
Compass Diversified’s Strong Q4 and Strategic Moves
Positive
Jan 16, 2025

On January 16, 2025, Compass Diversified Holdings held an Investor Day in New York City, featuring presentations by its management and subsidiary CEOs. The company reported strong subsidiary performance in Q4 2024, with expectations to meet or surpass high-end guidance levels, and announced strategic financial maneuvers including the sale of Ergobaby and raising $300 million through a term loan.

Private Placements and FinancingBusiness Operations and Strategy
Compass Diversified Holdings Expands Credit Facilities for Growth
Positive
Jan 10, 2025

Compass Diversified Holdings has amended its Credit Agreement to include a $200 million Incremental Term Loan and $100 million in delayed draw term loan commitments. These funds will be used for acquisitions, working capital, and other corporate purposes, positioning CODI for strategic growth and operational flexibility.

Executive/Board ChangesBusiness Operations and Strategy
Compass Diversified Holdings Announces Board Leadership Change
Neutral
Jan 6, 2025

Compass Diversified Holdings announced a change in its Board of Directors with Gordon M. Burns stepping down as Chair of the Nominating and Corporate Governance Committee, effective January 3, 2025, due to other commitments. He will continue serving on the Board until the 2025 Annual Meeting. Nancy B. Mahon, a current director and Chief Sustainability Officer at The Estée Lauder Companies, has been appointed as the new Chair. This transition is part of CODI’s ongoing efforts to strengthen and diversify its Board, with an emphasis on strong governance and oversight. The change reflects the company’s strategic focus on adapting to future challenges while maintaining a robust governance framework.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.