Thursday, July 18, 2019

Compass Has Successfully Monetized Some Assets, But Core Growth Remains An Issue

Kudos to Compass Diversified Holdings (CODI) management with the sales of Manitoba Harvest and Clean Earth in 2019, as the company obtained strong valuations (at least in terms of EV/EBITDA and EV/revenue) for those two assets. With around $950 million coming in, Compass has more options for redeploying capital, including some debt reduction alongside more M&A.

One of the biggest issues I’ve had with Compass still remains, though, and that’s the relatively weak prospect for core distributable cash flow. Cash available for distribution has grown at only a low-to-mid single-digit rate, and the distribution hasn’t changed in over five years, tempering the excitement over the 7%-plus yield that it offers. I can’t say I’m all that excited about the underlying businesses within the Compass family, though the shares do look reasonably-priced for investors who want a more income-heavy return structure.

Read the full article here:
Compass Has Successfully Monetized Some Assets, But Core Growth Remains An Issue

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