Compass Diversified (CODI, Financial) has come under increased scrutiny after Raymond James initiated a review of its Market Perform rating. This move follows the announcement of an internal investigation into Lugano, a subsidiary, concerning irregularities in non-company financing and inventory practices.
The company anticipates the need to revise its fiscal 2024 financial statements, with the possibility that earlier financial reports may also be unreliable. An analyst from Raymond James highlighted that such financial data is crucial for the firm's financial models and ratings. As a result, the integrity of Compass's previous financial information is being questioned, impacting the firm's evaluation of the company.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 7 analysts, the average target price for Compass Diversified Holdings (CODI, Financial) is $30.29 with a high estimate of $36.00 and a low estimate of $23.00. The average target implies an upside of 75.57% from the current price of $17.25. More detailed estimate data can be found on the Compass Diversified Holdings (CODI) Forecast page.
Based on the consensus recommendation from 9 brokerage firms, Compass Diversified Holdings's (CODI, Financial) average brokerage recommendation is currently 1.9, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Compass Diversified Holdings (CODI, Financial) in one year is $27.14, suggesting a upside of 57.33% from the current price of $17.25. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Compass Diversified Holdings (CODI) Summary page.
CODI Key Business Developments
Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Compass Diversified Holdings (CODI, Financial) achieved double-digit sales growth and increased adjusted EBITDA by more than 30% for the full year 2024.
- The company strategically acquired H1ypot and Life Foam, expanding its presence in the feminine hygiene and cold chain sectors, respectively.
- CODI raised over $115 million in preferred equity, helping to deleverage its balance sheet and reduce the overall weighted average cost of capital.
- The company implemented changes to its management services agreement to reduce long-term costs for shareholders and align management compensation with shareholder interests.
- Lugano, a subsidiary, delivered exceptional results with annual sales growth of more than 50% and a 76.4% increase in adjusted EBITDA.
Negative Points
- The company faced a one-time impact of a $12 million inventory write-down at 5.11 due to PFAS regulations.
- CODI's industrial businesses experienced flat sales and a modest decline in adjusted EBITDA as they focused on repositioning for the long term.
- The geopolitical uncertainty, including tariffs and potential trade wars, poses incremental risks for 2025.
- The company anticipates significant cost increases due to the opening of three new Lugano salons in 2025, which may temporarily dilute margins.
- Despite improvements, the overall market for mergers and acquisitions remains subdued, affecting CODI's ability to acquire new businesses.
