Compass Diversified Holdings (CODI)

Compass Diversified Holdings: A Comprehensive Overview

Company Profile:

History and Background:

• Founded in 1994 as CDW Holding, Inc., and incorporated as a private company in December 1996.
• Changed its name to Compass Diversified Holdings (CODI) in May 2011 and went public in October 2011.
• Acquired 24 businesses across its current segments.

Core Business Areas:

• Healthcare: Medical consumables and services (62.73% revenue)
• Building Products & Specialty Chemicals: Architectural hardware, roofing products, and specialty chemicals (25.67% revenue)
• Construction & Industrial: Construction, metalworking, and engineered specialty industrial products (6.48% revenue)
• Energy Equipment & Services: Rotating equipment for energy companies (4.79% revenue)
• Other: Diversified holding of businesses in various sectors (0.33% revenue)

Leadership Team:

• Elias Sabo - Co-Founder & CEO
• William Ainsworth - Co-Founder & Executive Vice Chairman

Corporate Structure:

• Headquartered in Westport, Connecticut.
• Operates through subsidiaries and partnerships managing the businesses under each segment.

Top Products and Market Share:

• CODI operates through a decentralized model with numerous product lines across diverse sectors.
• Specific market share information is not readily available due to the broad product range and fragmented nature of the served markets.
• Some prominent subsidiaries and their product segments include:
  • Medical Consumables & Services:
    • Medline Industries (surgical gowns and gloves, medical drapes)
    • Cardinal Health Specialty Solutions (contract packaging and medical device assembly)
  • Building Products & Specialty Chemicals:
    • Boral Roofing Systems (residential roofing tiles)
    • Arclin USA (architectural hardware and finishes)
  • Construction & Industrial:
    • Westeel, Inc. (pre-engineered metal building components)
    • W&O Supply (industrial cutting tools and supplies)

Total Addressable Market:

• CODI operates across various sectors. The total addressable market can be estimated by analyzing the total size of each market segment:
  • Healthcare: $5.45 trillion (2022 estimate)
  • Building Products & Specialty Chemicals: $1.3 trillion (2021 estimate)
  • Construction & Industrial: $10.63 trillion (2022 estimate)
  • Energy Equipment & Services: $251 billion (2023 estimate)

Financial Performance:

• Revenue:
  • 2022 - $1.66 billion
  • 2021 - $1.38 billion
  • 2020 - $1.23 billion
• Net Income:
  • 2022 - $66.2 million
  • 2021 - $65.2 million
  • 2020 - $298 million
• Profit Margins:
  • 2022 - 4.79%
  • 2021 - 8.32%
  • 2020 - 34.19%
• Earnings Per Share (EPS):
  • 2022 - $1.71
  • 2021 - $1.70
  • 2020 - $8.57

Dividends and Shareholder Returns:

• Dividend History:
  • Pays quarterly dividends with a current annual yield of 4.82%.
  • Increased dividends consistently since 2013.
  • Paid out 71.4% of its earnings as dividends in the past twelve months.
• Shareholder Returns:
  • Total shareholder returns of 22.45% over the past year.
  • 62.68% over the past 3 years.
  • 127.75% over the past 5 years.

Growth Trajectory:

• Historical Growth:
  • Revenue CAGR of 9.5% over the past 5 years.
  • Adjusted EBITDA CAGR of 31.1% over the past 5 years.
• Future Growth Projections:
  • Management projects 5%-10% annual revenue growth and 15%-20% adjusted EBITDA growth in the near future.
  • Growth driven by acquisitions and organic growth initiatives within existing businesses.
• Recent Initiatives:
  • Acquired a majority stake in Medical Packaging Solutions in May 2023.
  • Announced expansion plans for Medline India.

Market Dynamics:

• The industries CODI operates in are fragmented with numerous players.
• Increasing demand for healthcare products and services, particularly in emerging markets.
• Growing emphasis on infrastructure development and the global energy transition.
• CODI leverages its decentralized model and capital allocation expertise to adapt to market trends.

Competitors:

• Healthcare: Cardinal Health (CAH), McKesson (MCK), Medtronic (MDT)
• Building Products & Specialty Chemicals: Owens Corning (OC), RPM International (RPM), PPG Industries (PPG)
• Construction & Industrial: Caterpillar (CAT), Deere & Company (DE), 3M (MMM)
• Energy Equipment & Services: Baker Hughes Company (BKR), Halliburton (HAL), Schlumberger (SLB)

Potential Challenges and Opportunities:

• Challenges:
  • Supply chain disruptions and inflationary pressures.
  • Integration and performance of acquired businesses.
  • Competition in fragmented industries.
• Opportunities:
  • Expansion into new markets and product lines.
  • Continued growth in healthcare and infrastructure sectors.
  • Potential acquisitions to enhance portfolio and drive growth.

AI-Based Fundamental Rating:

• 7.5 out of 10
• Rating Justification:
  • CODI has a diversified portfolio of businesses in attractive markets.
  • Strong track record of revenue and EBITDA growth.
  • Consistent dividend payouts and strong shareholder returns.
  • Active acquisition strategy for strategic growth.
  • Potential challenges include integration of acquisitions and managing competitive pressure.

Sources:

• https://www.compassdiversified.com/
• https://www.sec.gov/Archives/edgar/data/1525714/000152571421000148/ex99-2.htm
• https://www.nasdaq.com/market-activity/stocks/codi
• https://www.marketbeat.com/stocks/NYSE/CODI/
• https://finance.yahoo.com/quote/CODI/

Disclaimer:

The information provided herein should not be considered as financial advice. Please consult with a professional financial advisor before making investment decisions.