Breaking Down Compass Diversified (CODI) Financial Health: Key Insights for Investors

Are you keeping a close watch on Compass Diversified's (CODI) financial performance? With the company reporting a 11.9% increase in net sales to $2.2 billion for the full year 2024, and adjusted EBITDA up by 30% reaching $424.8 million, it's crucial to understand the key factors driving these results. But how sustainable is this growth, considering the company's debt of $1.78 billion? What impact will strategic moves like the sale of Ergobaby for $104 million and the acquisition of The Honey Pot Co. have on future performance? Dive in to explore these insights and more, ensuring you're equipped to make informed investment decisions.

Compass Diversified (CODI) Revenue Analysis

Understanding the revenue streams of Compass Diversified (CODI) is crucial for investors seeking to assess the company's financial health and stability. CODI operates as a holding company, acquiring and managing a diverse range of businesses across various industries. Therefore, its revenue streams are derived from the consolidated earnings of its subsidiaries.

Compass Diversified’s revenue streams are multifaceted, stemming from its diverse portfolio of businesses. These businesses operate across various sectors, providing a buffer against sector-specific downturns. Key revenue sources include:

• Branded Consumer Businesses: This segment includes companies that manufacture and market branded consumer products.
• Engineered Products Businesses: This segment focuses on businesses that produce engineered products and solutions for various industrial applications.

Analyzing the year-over-year revenue growth rate provides insights into CODI's performance and its ability to generate increasing sales. For instance, monitoring historical trends reveals periods of strong growth, stability, or decline, influenced by factors like economic conditions, industry trends, and company-specific initiatives. According to the 2024 financial data, Compass Diversified reported a revenue of $2.11 billion, a 2.74% decrease compared to the previous year.

To gain a comprehensive understanding of Compass Diversified's financial performance, it's essential to examine the contribution of different business segments to the overall revenue. By analyzing the revenue generated by each segment, investors can identify the key drivers of growth and assess the diversification of the company's revenue base. Significant changes in revenue streams, such as the acquisition or divestiture of a business, can also impact the overall revenue mix and should be carefully evaluated.

Here’s a breakdown of Compass Diversified’s revenue by segment based on the 2024 data:

• Industrial: $1.38 billion in revenue.
• Consumer: $730.2 million in revenue.

Understanding these components helps stakeholders gauge where the majority of revenue originates and how each segment contributes to the overall financial picture.

Here is a detailed table summarizing Compass Diversified's revenue analysis:

Analyzing these figures provides a clearer picture of where Compass Diversified stands financially. For additional insights into the company's mission, vision, and core values, you can visit: Mission Statement, Vision, & Core Values of Compass Diversified (CODI).

Compass Diversified (CODI) Profitability Metrics

Assessing the profitability of Compass Diversified (CODI) involves examining several key metrics that provide insights into the company's financial health and operational efficiency. These metrics include gross profit, operating profit, and net profit margins, each offering a unique perspective on CODI's ability to generate earnings.

Gross profit is the revenue a company retains after deducting the costs associated with producing and selling its goods or services. It serves as a crucial indicator of production efficiency. Operating profit, which is derived by subtracting operating expenses such as administrative and selling costs from gross profit, reveals how well a company manages its operational costs. Net profit, the bottom line, represents the actual profit after all expenses, including interest and taxes, are deducted. Examining these metrics over time helps identify trends and potential areas of concern or improvement.

While specific, comprehensive profitability ratios for Compass Diversified (CODI) directly benchmarked against precise industry averages for the 2024 fiscal year are not readily available in the provided search results, we can still analyze the available data and contextual information to infer the company's profitability trends and operational efficiency.

To provide a clearer picture, it's beneficial to examine historical data and trends in CODI's profitability. The following table presents key profitability figures from past years, offering a view of how the company's financial performance has evolved.

Based on recent financial data, Compass Diversified has demonstrated notable performance. In 2023, the company reported a gross profit of $474.89 million, an operating income of $144.76 million, and a net income of $47.45 million. These figures reflect a positive trajectory compared to previous years, indicating effective cost management and revenue generation strategies.

Further insights into Compass Diversified can be found here: Mission Statement, Vision, & Core Values of Compass Diversified (CODI).

Analyzing operational efficiency involves assessing how effectively CODI manages its costs and utilizes its assets to generate revenue. Gross margin trends, in particular, provide valuable information about the company's ability to control production costs and maintain pricing power.

Key aspects of operational efficiency include:

• Cost Management: Monitoring and controlling production and operational costs to improve profitability.
• Gross Margin Trends: Analyzing the trend of gross margins to understand the company's pricing strategy and cost management effectiveness.

While comparing these ratios with industry averages provides a benchmark for performance, it's essential to consider the specific industry segments in which CODI operates, as different industries have varying profitability norms.

Compass Diversified (CODI) Debt vs. Equity Structure

Understanding how Compass Diversified (CODI) finances its operations and growth is crucial for investors. This involves analyzing its debt levels, debt-to-equity ratio, and overall approach to balancing debt and equity.

As of December 31, 2023, Compass Diversified (CODI) reported the following debt figures:

• Total debt: $1.75 billion
• Net debt: $1.68 billion

The company's debt structure includes both short-term and long-term obligations. Monitoring these levels helps in assessing the company's liquidity and solvency.

The debt-to-equity ratio is a key metric for evaluating a company's financial leverage. As of December 31, 203, Compass Diversified (CODI)’s debt-to-equity ratio can be derived from the total liabilities and total equity figures on their balance sheet. The most recent data available indicates:

• Total liabilities: $2.27 billion
• Total equity: $1.09 billion

Using these values, the debt-to-equity ratio can be calculated as total liabilities divided by total equity, which results in approximately 2.08. This ratio suggests that Compass Diversified (CODI) relies more on debt than equity to finance its assets.

Recent financial activities, such as debt issuances or refinancing, can significantly impact Compass Diversified (CODI)'s capital structure. For instance, the company may issue new debt to fund acquisitions or refinance existing debt to lower interest rates. Staying informed about these activities provides insights into the company's financial strategy and its ability to manage its debt obligations.

Balancing debt and equity is a strategic decision for Compass Diversified (CODI). While debt can provide leverage and potentially increase returns on equity, it also introduces financial risk. Equity financing, on the other hand, reduces financial risk but may dilute existing shareholders' ownership. Compass Diversified (CODI) must carefully weigh the costs and benefits of each financing option to optimize its capital structure and support its long-term growth objectives.

More in-depth analysis and context can be found here: Breaking Down Compass Diversified (CODI) Financial Health: Key Insights for Investors

Compass Diversified (CODI) Liquidity and Solvency

Analyzing Compass Diversified's (CODI) financial health requires a close look at its liquidity and solvency, revealing its ability to meet short-term obligations and long-term financial stability. Investors often use liquidity ratios to understand CODI's current financial standing. Here’s a breakdown of key metrics and trends based on the latest available data.

Assessing Compass Diversified's Liquidity:

To evaluate Compass Diversified's liquidity, several key ratios and cash flow trends should be examined. These metrics provide insights into the company's ability to meet its short-term obligations and manage its working capital effectively.

• Current and Quick Ratios (Liquidity Positions):

The current ratio and quick ratio are fundamental indicators of a company's liquidity. The current ratio measures a company's ability to pay off its current liabilities with its current assets. The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets.

As of fiscal year 2024, Compass Diversified's financial data provides the following insights:

• The current ratio is calculated by dividing current assets by current liabilities. For Compass Diversified, the current assets were $634.2 million and the current liabilities were $299.9 million. Therefore, the current ratio is 2.11.
• The quick ratio is calculated by subtracting inventories from current assets and dividing the result by current liabilities. For Compass Diversified, the quick assets (current assets minus inventories) were $538.9 million and the current liabilities were $299.9 million. Thus, the quick ratio is approximately 1.79.

A current ratio of 2.11 indicates that Compass Diversified has $2.11 of current assets for every $1 of current liabilities. Similarly, a quick ratio of 1.79 suggests that the company has $1.79 of liquid assets available to cover each $1 of current liabilities. These ratios suggest a strong liquidity position, indicating that Compass Diversified is well-equipped to handle its short-term obligations.

• Analysis of Working Capital Trends:

Working capital, the difference between a company's current assets and current liabilities, is a measure of its short-term financial health. Monitoring trends in working capital can reveal whether a company is efficiently managing its resources.

As of fiscal year 2024, Compass Diversified's working capital can be calculated as follows:

Working Capital = Current Assets - Current Liabilities

Working Capital = $634.2 million - $299.9 million = $334.3 million

A positive working capital of $334.3 million indicates that Compass Diversified has sufficient liquid assets to cover its short-term liabilities. Monitoring this trend over time would provide insights into the company's efficiency in managing its working capital.

• Cash Flow Statements Overview (Operating, Investing, and Financing Cash Flow Trends):

Cash flow statements provide a detailed look at how a company generates and uses cash through its operating, investing, and financing activities. Analyzing these trends can reveal a company's financial flexibility and sustainability.

For the fiscal year 2024, the cash flow activities for Compass Diversified are as follows:

The cash flow statement analysis reveals that Compass Diversified generated $233.4 million from its operating activities, indicating a strong ability to generate cash from its core business operations. The company used $146.9 million for investing activities, which may include capital expenditures or acquisitions. Additionally, $94.7 million was used for financing activities, which could include debt repayments or dividend payouts. These cash flow trends suggest that the company is generating positive cash flow from operations but is also investing in its business and returning capital to shareholders.

• Any Potential Liquidity Concerns or Strengths:

Based on the analyzed financial data, Compass Diversified exhibits several liquidity strengths:

• Strong Liquidity Ratios: The current ratio of 2.11 and quick ratio of 1.79 indicate a robust ability to meet short-term obligations.
• Positive Working Capital: A working capital of $334.3 million shows that the company has sufficient liquid assets to cover its short-term liabilities.
• Positive Operating Cash Flow: Generating $233.4 million in cash from operating activities demonstrates a strong ability to generate cash from core business operations.

However, potential investors should also be aware of:

• Investing and Financing Activities: The use of cash for investing and financing activities, while normal, requires careful monitoring to ensure sustainable financial management.

Overall, Compass Diversified demonstrates solid liquidity positions, supported by strong liquidity ratios and positive cash flow from operations. These factors suggest that the company is well-prepared to meet its short-term financial obligations.

Compass Diversified (CODI) Valuation Analysis

Assessing whether Compass Diversified (CODI) is overvalued or undervalued requires a look at several key financial metrics and market indicators. These include price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, stock price trends, dividend yield, payout ratios, and analyst consensus.

Currently, comprehensive real-time data for CODI's valuation ratios and analyst ratings is essential for an accurate assessment. Keep in mind that these metrics are snapshots in time and should be evaluated within the context of CODI's industry, growth prospects, and overall market conditions.

To determine if CODI is overvalued or undervalued, consider the following:

• Price-to-Earnings (P/E) Ratio: This ratio indicates how much investors are willing to pay for each dollar of CODI's earnings. A high P/E ratio might suggest overvaluation, while a low P/E could indicate undervaluation, relative to industry peers.
• Price-to-Book (P/B) Ratio: The P/B ratio compares CODI's market capitalization to its book value of equity. A lower P/B ratio may suggest that the stock is undervalued.
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: This ratio is often used to value companies, as it provides a more comprehensive view of a company's value than market capitalization alone. It takes into account debt and cash.

Analyzing Compass Diversified's (CODI) stock performance over the past year provides context on market sentiment and investor confidence:

• Stock Price Trends: Examining the stock price movement over the last 12 months (or longer) can reveal trends and patterns. Upward trends may reflect positive investor sentiment, while downward trends could indicate concerns.
• Dividend Yield and Payout Ratios: As of now, information regarding CODI's dividend yield and payout ratios are crucial for investors seeking income. A higher dividend yield can be attractive, but it's important to ensure that the payout ratio is sustainable.

Below is a sample table illustrating how these valuation metrics might be organized and compared. Please note that the data is illustrative and should be replaced with current figures for an accurate analysis.

Analyst consensus is another important factor:

• Analyst Consensus: Checking the consensus among analysts (buy, hold, or sell ratings) can provide insights into how professionals view CODI's prospects.

For more insights, check out: Breaking Down Compass Diversified (CODI) Financial Health: Key Insights for Investors

Compass Diversified (CODI) Risk Factors

Compass Diversified (CODI) faces a variety of internal and external risks that could impact its financial health. These risks span industry competition, regulatory changes, and overall market conditions. Understanding these potential challenges is crucial for investors.

Some key risks include:

• Industry Competition: The diverse industries in which Compass Diversified operates are highly competitive. Increased competition could lead to pricing pressures and reduced profitability.
• Regulatory Changes: Changes in laws and regulations, including environmental and labor laws, could increase compliance costs and negatively affect the operations of its subsidiaries.
• Market Conditions: Economic downturns or changes in consumer spending habits could reduce demand for the products and services offered by Compass Diversified's businesses.

Operational, financial, and strategic risks are often highlighted in Compass Diversified's earnings reports and filings. For example:

• Operational Risks: These include potential disruptions in the supply chain, production issues, and challenges in integrating acquired businesses.
• Financial Risks: Fluctuations in interest rates, changes in credit markets, and the ability to refinance debt could impact the company's financial performance.
• Strategic Risks: The success of Compass Diversified's strategy depends on its ability to identify and acquire attractive businesses, as well as effectively manage and grow these businesses.

Mitigation strategies and plans are essential for managing these risks. Compass Diversified may employ several strategies, such as:

• Diversification: Operating across various industries helps to reduce the impact of any single industry downturn.
• Operational Improvements: Implementing best practices across its subsidiaries to improve efficiency and reduce costs.
• Financial Management: Actively managing debt levels and interest rate exposure to maintain financial stability.

The following table summarizes some of the key risk factors and potential mitigation strategies:

Understanding Compass Diversified's risk factors is crucial for investors. For more insights into the company's values and objectives, explore Mission Statement, Vision, & Core Values of Compass Diversified (CODI).

Compass Diversified (CODI) Growth Opportunities

Compass Diversified (CODI) exhibits several key growth drivers that investors should monitor. These include strategic acquisitions, market expansions, and product innovations within its diverse portfolio of businesses. Understanding these elements is crucial for assessing the company's potential for future financial success.

Here's a breakdown of potential future growth prospects:

• Acquisitions: CODI has historically grown through acquiring controlling interests in established, profitable businesses. Future acquisitions in diverse sectors could further expand its revenue base and reduce sector-specific risks.
• Market Expansion: Many of CODI's subsidiaries have opportunities to expand their market presence, both domestically and internationally. This could involve entering new geographic regions or targeting new customer segments.
• Product Innovation: Innovation within its existing businesses can lead to increased sales and market share. This includes developing new products, improving existing ones, and adopting new technologies.

While specific revenue growth projections and earnings estimates for future years are subject to market conditions and company performance, analysts' estimates provide insight. However, remember that these are just estimations.

Strategic initiatives and partnerships also play a vital role in CODI's growth trajectory. These initiatives may include:

• Operational Improvements: Implementing operational efficiencies across its subsidiaries to improve profitability.
• Strategic Partnerships: Forming alliances to expand market reach or enhance product offerings.
• Sustainability Initiatives: Focusing on sustainable business practices, which can attract environmentally conscious customers and investors.

One of Compass Diversified's competitive advantages lies in its ability to identify and acquire businesses with strong market positions and growth potential. Its decentralized operating model allows subsidiaries to maintain their entrepreneurial spirit while benefiting from CODI's financial resources and strategic guidance. This approach enables CODI to create value across its diverse portfolio.

To gain a better understanding of the company's guiding principles, explore Mission Statement, Vision, & Core Values of Compass Diversified (CODI).