Compass Diversified Holdings (CODI) AI Stock Analysis

• Market Cap: $1.46B
• Dividend Yield: 5.14%
• Average Volume (3M): 244.25K
• Price to Earnings (P/E): ―
• Beta (1Y): 1.17
• Revenue Growth: 6.77%
• EPS Growth: 9.95%
• Country: US
• Employees: 1,404
• Sector: Industrials
• Sector Strength: 72
• Industry: Industrial Conglomerates
• EPS (TTM): -1.39
• Shares Outstanding: 75,235,970
• 10 Day Avg. Volume: 327,588
• 30 Day Avg. Volume: 244,250
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.65
• Price to Cash Flow (P/CF): 35.90
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $31.00
• Price Target Upside: 59.47% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 4

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 Business Overview & Revenue Model

Company Description

Compass 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 Money

Compass 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

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

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

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 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
2.20B	2.06B	2.26B	1.84B	1.56B
	Gross Profit
1.00B	893.32M	907.74M	725.96M	562.78M
	EBIT
230.13M	90.07M	175.57M	139.50M	94.83M
	EBITDA
341.85M	236.13M	253.82M	249.70M	145.72M
	Net Income Common Stockholders
12.81M	246.29M	36.39M	24.86M	22.78M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
59.73M	450.48M	61.27M	157.13M	70.74M
	Total Assets
4.05B	3.82B	3.85B	3.14B	2.60B
	Total Debt
1.77B	1.67B	1.83B	1.28B	899.46M
	Net Debt
1.71B	1.22B	1.77B	1.13B	828.72M
	Total Liabilities
2.49B	2.30B	2.49B	1.86B	1.38B
	Stockholders Equity
1.30B	1.33B	1.14B	1.11B	1.10B
Cash Flow		Free Cash Flow
-124.34M	22.30M	-92.56M	94.17M	117.86M
	Operating Cash Flow
-67.64M	78.08M	-28.29M	134.05M	148.63M
	Investing Cash Flow
-422.45M	570.50M	-626.73M	-317.50M	-700.83M
	Financing Cash Flow
100.61M	-260.16M	556.88M	273.21M	521.73M

Compass Diversified Holdings Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 19.44
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: 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 Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MAIN	77 Outperform	$4.98B	9.35	19.26%	5.28%	51.80%	12.05%
ARCC	76 Outperform	$14.50B	8.79	12.40%	8.96%	19.95%	-10.57%
GBDC	73 Outperform	$3.89B	10.51	9.40%	11.48%	16.10%	-24.30%
CSWC	67 Neutral	$1.10B	15.71	8.57%	10.60%	4.85%	-37.38%
CODI	64 Neutral	$1.46B	―	-4.98%	5.14%	6.77%	9.95%
Sector *	61 Neutral	$8.21B	13.22	1.07%	3.07%	3.78%	-16.88%
PNNT	53 Neutral	$455.77M	27.71	3.28%	13.15%	―	-66.59%

Compass Diversified Holdings Corporate Events

Compass Diversified Holdings Reports Strong 2024 Financial Results

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.

Compass Diversified Announces Director Retirement in 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.

Compass Diversified’s Strong Q4 and Strategic Moves

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.

Compass Diversified Holdings Expands Credit Facilities for Growth

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.

Compass Diversified Holdings Announces Board Leadership Change

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.