Compass Diversified (NYSE:CODI) Is About To Turn The Corner
Compass Diversified (NYSE:CODI) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Compass Diversified is a private equity firm specializing in add on acquisitions, buyouts, industry consolidation, recapitalization, late stage and middle market investments. The US$1.4b market-cap company posted a loss in its most recent financial year of US$49m and a latest trailing-twelve-month loss of US$1.8m shrinking the gap between loss and breakeven. The most pressing concern for investors is Compass Diversified's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
View our latest analysis for Compass Diversified
Compass Diversified is bordering on breakeven, according to the 5 American Diversified Financial analysts. They expect the company to post a final loss in 2021, before turning a profit of US$72m in 2022. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 73% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Compass Diversified's growth isn’t the focus of this broad overview, however, bear in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
Before we wrap up, there’s one issue worth mentioning. Compass Diversified currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Compass Diversified's case is 95%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Compass Diversified, so if you are interested in understanding the company at a deeper level, take a look at Compass Diversified's company page on Simply Wall St. We've also compiled a list of essential aspects you should further examine:
Historical Track Record: What has Compass Diversified's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Compass Diversified's board and the CEO’s background.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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