Analysts Expect Compass Diversified (NYSE:CODI) To Breakeven Soon

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. On 31 December 2020, the US$1.6b market-cap company posted a loss of US$22m for its most recent financial year. Many investors are wondering about the rate at which Compass Diversified will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out 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 2020, before turning a profit of US$37m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 97% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Compass Diversified's growth isn’t the focus of this broad overview, however, keep in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Compass Diversified is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Compass Diversified's case is 74%. 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 relevant factors you should further research:

1. 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.
2. 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.
3. 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.

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This article by Simply Wall St is general in nature. 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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