Intrinsic value of Compass Diversified Holdings - CODI

Previous Close

$17.20

  Intrinsic Value

$12.88

stock screener

  Rating & Target

sell

-25%

  Value-price divergence*

+699%

Previous close

$17.20

 
Intrinsic value

$12.88

 
Up/down potential

-25%

 
Rating

sell

 
Value-price divergence*

+699%

Our model is not good at valuating stocks of financial companies, such as CODI.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CODI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  34.34
  50.30
  45.77
  41.69
  38.02
  34.72
  31.75
  29.07
  26.67
  24.50
  22.55
  20.80
  19.22
  17.79
  16.51
  15.36
  14.33
  13.39
  12.55
  11.80
  11.12
  10.51
  9.96
  9.46
  9.01
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
Revenue, $m
  978
  1,470
  2,143
  3,036
  4,191
  5,646
  7,438
  9,600
  12,161
  15,140
  18,554
  22,412
  26,719
  31,473
  36,671
  42,305
  48,366
  54,844
  61,730
  69,014
  76,687
  84,745
  93,183
  101,999
  111,194
  120,772
  130,738
  141,102
  151,874
  163,068
  174,701
Variable operating expenses, $m
 
  1,344
  1,936
  2,723
  3,740
  5,021
  6,600
  8,504
  10,759
  13,383
  16,390
  19,738
  23,531
  27,718
  32,296
  37,258
  42,596
  48,301
  54,365
  60,780
  67,538
  74,635
  82,066
  89,830
  97,928
  106,363
  115,140
  124,267
  133,754
  143,613
  153,858
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  959
  1,344
  1,936
  2,723
  3,740
  5,021
  6,600
  8,504
  10,759
  13,383
  16,390
  19,738
  23,531
  27,718
  32,296
  37,258
  42,596
  48,301
  54,365
  60,780
  67,538
  74,635
  82,066
  89,830
  97,928
  106,363
  115,140
  124,267
  133,754
  143,613
  153,858
Operating income, $m
  19
  126
  206
  313
  451
  624
  838
  1,096
  1,402
  1,757
  2,164
  2,674
  3,188
  3,755
  4,375
  5,047
  5,770
  6,543
  7,365
  8,234
  9,149
  10,111
  11,117
  12,169
  13,266
  14,409
  15,598
  16,834
  18,120
  19,455
  20,843
EBITDA, $m
  105
  248
  362
  513
  708
  954
  1,257
  1,623
  2,056
  2,559
  3,137
  3,789
  4,517
  5,321
  6,199
  7,152
  8,176
  9,272
  10,436
  11,667
  12,964
  14,326
  15,753
  17,243
  18,798
  20,417
  22,102
  23,854
  25,675
  27,567
  29,534
Interest expense (income), $m
  23
  29
  54
  87
  131
  189
  261
  350
  457
  584
  732
  901
  1,093
  1,306
  1,542
  1,800
  2,080
  2,380
  2,702
  3,043
  3,405
  3,785
  4,185
  4,604
  5,041
  5,497
  5,972
  6,467
  6,981
  7,515
  8,071
Earnings before tax, $m
  63
  97
  153
  226
  319
  436
  577
  746
  945
  1,173
  1,433
  1,773
  2,095
  2,449
  2,833
  3,247
  3,691
  4,163
  4,663
  5,191
  5,745
  6,325
  6,932
  7,566
  8,225
  8,912
  9,626
  10,368
  11,139
  11,940
  12,772
Tax expense, $m
  9
  26
  41
  61
  86
  118
  156
  202
  255
  317
  387
  479
  566
  661
  765
  877
  997
  1,124
  1,259
  1,401
  1,551
  1,708
  1,872
  2,043
  2,221
  2,406
  2,599
  2,799
  3,007
  3,224
  3,449
Net income, $m
  55
  71
  112
  165
  233
  318
  422
  545
  690
  856
  1,046
  1,294
  1,529
  1,788
  2,068
  2,371
  2,694
  3,039
  3,404
  3,789
  4,194
  4,618
  5,061
  5,523
  6,004
  6,506
  7,027
  7,568
  8,131
  8,716
  9,324

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  40
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,777
  2,611
  3,806
  5,393
  7,443
  10,028
  13,211
  17,052
  21,600
  26,892
  32,956
  39,809
  47,458
  55,903
  65,135
  75,142
  85,908
  97,414
  109,645
  122,582
  136,212
  150,525
  165,512
  181,171
  197,503
  214,515
  232,217
  250,625
  269,758
  289,641
  310,303
Adjusted assets (=assets-cash), $m
  1,737
  2,611
  3,806
  5,393
  7,443
  10,028
  13,211
  17,052
  21,600
  26,892
  32,956
  39,809
  47,458
  55,903
  65,135
  75,142
  85,908
  97,414
  109,645
  122,582
  136,212
  150,525
  165,512
  181,171
  197,503
  214,515
  232,217
  250,625
  269,758
  289,641
  310,303
Revenue / Adjusted assets
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
Average production assets, $m
  574
  863
  1,258
  1,782
  2,460
  3,314
  4,366
  5,635
  7,138
  8,887
  10,891
  13,156
  15,684
  18,475
  21,526
  24,833
  28,391
  32,194
  36,235
  40,511
  45,016
  49,746
  54,699
  59,874
  65,271
  70,893
  76,743
  82,827
  89,150
  95,721
  102,549
Working capital, $m
  250
  325
  474
  671
  926
  1,248
  1,644
  2,122
  2,687
  3,346
  4,100
  4,953
  5,905
  6,956
  8,104
  9,349
  10,689
  12,121
  13,642
  15,252
  16,948
  18,729
  20,593
  22,542
  24,574
  26,691
  28,893
  31,183
  33,564
  36,038
  38,609
Total debt, $m
  557
  1,012
  1,642
  2,478
  3,559
  4,921
  6,598
  8,623
  11,019
  13,808
  17,004
  20,615
  24,647
  29,097
  33,962
  39,236
  44,909
  50,973
  57,419
  64,237
  71,420
  78,962
  86,861
  95,113
  103,720
  112,685
  122,014
  131,715
  141,798
  152,277
  163,166
Total liabilities, $m
  921
  1,376
  2,006
  2,842
  3,923
  5,285
  6,962
  8,987
  11,383
  14,172
  17,368
  20,979
  25,011
  29,461
  34,326
  39,600
  45,273
  51,337
  57,783
  64,601
  71,784
  79,326
  87,225
  95,477
  104,084
  113,049
  122,378
  132,079
  142,162
  152,641
  163,530
Total equity, $m
  856
  1,235
  1,800
  2,551
  3,521
  4,743
  6,249
  8,066
  10,217
  12,720
  15,588
  18,830
  22,448
  26,442
  30,809
  35,542
  40,634
  46,077
  51,862
  57,981
  64,428
  71,198
  78,287
  85,694
  93,419
  101,466
  109,839
  118,545
  127,595
  137,000
  146,773
Total liabilities and equity, $m
  1,777
  2,611
  3,806
  5,393
  7,444
  10,028
  13,211
  17,053
  21,600
  26,892
  32,956
  39,809
  47,459
  55,903
  65,135
  75,142
  85,907
  97,414
  109,645
  122,582
  136,212
  150,524
  165,512
  181,171
  197,503
  214,515
  232,217
  250,624
  269,757
  289,641
  310,303
Debt-to-equity ratio
  0.651
  0.820
  0.910
  0.970
  1.010
  1.040
  1.060
  1.070
  1.080
  1.090
  1.090
  1.090
  1.100
  1.100
  1.100
  1.100
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
Adjusted equity ratio
  0.470
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  55
  71
  112
  165
  233
  318
  422
  545
  690
  856
  1,046
  1,294
  1,529
  1,788
  2,068
  2,371
  2,694
  3,039
  3,404
  3,789
  4,194
  4,618
  5,061
  5,523
  6,004
  6,506
  7,027
  7,568
  8,131
  8,716
  9,324
Depreciation, amort., depletion, $m
  86
  122
  156
  200
  258
  330
  419
  527
  654
  802
  972
  1,115
  1,329
  1,566
  1,824
  2,104
  2,406
  2,728
  3,071
  3,433
  3,815
  4,216
  4,635
  5,074
  5,531
  6,008
  6,504
  7,019
  7,555
  8,112
  8,691
Funds from operations, $m
  128
  193
  267
  365
  491
  648
  841
  1,072
  1,344
  1,659
  2,018
  2,409
  2,859
  3,353
  3,892
  4,475
  5,100
  5,767
  6,475
  7,222
  8,009
  8,833
  9,696
  10,597
  11,536
  12,513
  13,530
  14,588
  15,686
  16,828
  18,014
Change in working capital, $m
  17
  109
  149
  197
  255
  322
  396
  478
  566
  658
  755
  853
  952
  1,051
  1,149
  1,245
  1,339
  1,432
  1,522
  1,610
  1,696
  1,781
  1,865
  1,948
  2,032
  2,117
  2,203
  2,290
  2,381
  2,474
  2,571
Cash from operations, $m
  111
  84
  119
  168
  236
  327
  445
  594
  778
  1,000
  1,263
  1,556
  1,907
  2,303
  2,744
  3,230
  3,761
  4,336
  4,953
  5,613
  6,313
  7,053
  7,831
  8,649
  9,504
  10,397
  11,328
  12,297
  13,306
  14,354
  15,444
Maintenance CAPEX, $m
  0
  -49
  -73
  -107
  -151
  -208
  -281
  -370
  -478
  -605
  -753
  -923
  -1,115
  -1,329
  -1,566
  -1,824
  -2,104
  -2,406
  -2,728
  -3,071
  -3,433
  -3,815
  -4,216
  -4,635
  -5,074
  -5,531
  -6,008
  -6,504
  -7,019
  -7,555
  -8,112
New CAPEX, $m
  -24
  -289
  -395
  -524
  -678
  -854
  -1,052
  -1,269
  -1,503
  -1,749
  -2,004
  -2,265
  -2,528
  -2,791
  -3,051
  -3,307
  -3,558
  -3,803
  -4,042
  -4,276
  -4,505
  -4,730
  -4,953
  -5,175
  -5,398
  -5,622
  -5,850
  -6,083
  -6,323
  -6,571
  -6,828
Cash from investing activities, $m
  -363
  -338
  -468
  -631
  -829
  -1,062
  -1,333
  -1,639
  -1,981
  -2,354
  -2,757
  -3,188
  -3,643
  -4,120
  -4,617
  -5,131
  -5,662
  -6,209
  -6,770
  -7,347
  -7,938
  -8,545
  -9,169
  -9,810
  -10,472
  -11,153
  -11,858
  -12,587
  -13,342
  -14,126
  -14,940
Free cash flow, $m
  -252
  -253
  -349
  -463
  -593
  -736
  -888
  -1,046
  -1,202
  -1,354
  -1,494
  -1,631
  -1,736
  -1,817
  -1,873
  -1,901
  -1,901
  -1,873
  -1,817
  -1,734
  -1,625
  -1,492
  -1,337
  -1,162
  -968
  -757
  -530
  -290
  -37
  228
  503
Issuance/(repayment) of debt, $m
  248
  461
  630
  836
  1,081
  1,362
  1,678
  2,024
  2,396
  2,789
  3,196
  3,612
  4,031
  4,450
  4,865
  5,274
  5,673
  6,064
  6,445
  6,818
  7,183
  7,543
  7,898
  8,252
  8,607
  8,965
  9,329
  9,701
  10,083
  10,478
  10,889
Issuance/(repurchase) of shares, $m
  84
  342
  454
  586
  737
  904
  1,084
  1,272
  1,461
  1,647
  1,823
  1,947
  2,089
  2,207
  2,299
  2,363
  2,398
  2,404
  2,381
  2,330
  2,253
  2,152
  2,028
  1,884
  1,721
  1,541
  1,346
  1,138
  919
  689
  449
Cash from financing (excl. dividends), $m  
  287
  803
  1,084
  1,422
  1,818
  2,266
  2,762
  3,296
  3,857
  4,436
  5,019
  5,559
  6,120
  6,657
  7,164
  7,637
  8,071
  8,468
  8,826
  9,148
  9,436
  9,695
  9,926
  10,136
  10,328
  10,506
  10,675
  10,839
  11,002
  11,167
  11,338
Total cash flow (excl. dividends), $m
  32
  550
  734
  959
  1,224
  1,530
  1,874
  2,251
  2,655
  3,082
  3,525
  3,928
  4,384
  4,840
  5,291
  5,735
  6,170
  6,594
  7,009
  7,414
  7,812
  8,202
  8,589
  8,974
  9,360
  9,750
  10,145
  10,549
  10,965
  11,395
  11,841
Retained Cash Flow (-), $m
  -30
  -413
  -565
  -751
  -970
  -1,222
  -1,506
  -1,817
  -2,151
  -2,503
  -2,868
  -3,242
  -3,618
  -3,994
  -4,367
  -4,733
  -5,092
  -5,443
  -5,785
  -6,119
  -6,447
  -6,770
  -7,089
  -7,407
  -7,725
  -8,047
  -8,373
  -8,707
  -9,050
  -9,405
  -9,773
Prev. year cash balance distribution, $m
 
  34
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  171
  169
  208
  254
  308
  368
  434
  504
  579
  656
  686
  766
  845
  924
  1,002
  1,078
  1,152
  1,224
  1,295
  1,364
  1,433
  1,500
  1,568
  1,635
  1,703
  1,772
  1,843
  1,915
  1,990
  2,068
Discount rate, %
 
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
 
  160
  146
  166
  186
  204
  219
  230
  235
  236
  231
  206
  194
  178
  159
  139
  119
  99
  81
  65
  50
  38
  28
  20
  14
  10
  7
  4
  3
  2
  1
Current shareholders' claim on cash, %
  100
  74.4
  57.0
  44.9
  36.3
  29.9
  25.1
  21.5
  18.7
  16.5
  14.8
  13.4
  12.3
  11.3
  10.6
  9.9
  9.4
  9.0
  8.6
  8.3
  8.0
  7.8
  7.6
  7.5
  7.4
  7.3
  7.2
  7.1
  7.1
  7.1
  7.0

Compass Diversified Holdings LLC is a private equity firm specializing in acquisitions, buyouts, and middle market investments. It seeks to invest in manufacturing, distribution, consumer products, and business services sectors. The firm prefers to invest in companies based in North America. It seeks to invest between $100 million and $500 million in transaction size between $75 million and $500 million in companies with cash flows between $10 million and $450 million, enterprise values between $100 million and $500 million, and an EBITDA between $10 million and $50 million. It seeks to acquire controlling ownership interests in its portfolio companies and can also make additional platform acquisitions. The firm invests through its balance sheet and typically holds investments between five to seven years. Compass Diversified Holdings LLC was founded in 2005 and is based in Westport, Connecticut with an additional office in Irvine, California.

FINANCIAL RATIOS  of  Compass Diversified Holdings (CODI)

Valuation Ratios
P/E Ratio 18.7
Price to Sales 1.1
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 9.3
Price to Free Cash Flow 11.8
Growth Rates
Sales Growth Rate 34.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 7
Current Ratio 0
LT Debt to Equity 64.4%
Total Debt to Equity 65.1%
Interest Coverage 4
Management Effectiveness
Return On Assets 4.7%
Ret/ On Assets - 3 Yr. Avg. 13.1%
Return On Total Capital 4.3%
Ret/ On T. Cap. - 3 Yr. Avg. 15.2%
Return On Equity 6.5%
Return On Equity - 3 Yr. Avg. 24%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 33.4%
Gross Margin - 3 Yr. Avg. 32.9%
EBITDA Margin 17.6%
EBITDA Margin - 3 Yr. Avg. 27.9%
Operating Margin 1.9%
Oper. Margin - 3 Yr. Avg. 18.3%
Pre-Tax Margin 6.4%
Pre-Tax Margin - 3 Yr. Avg. 17.6%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 23.9%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. 26.2%
Payout Ratio 141.8%

CODI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CODI stock intrinsic value calculation we used $978 million for the last fiscal year's total revenue generated by Compass Diversified Holdings. The default revenue input number comes from 2016 income statement of Compass Diversified Holdings. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CODI stock valuation model: a) initial revenue growth rate of 50.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.1%, whose default value for CODI is calculated based on our internal credit rating of Compass Diversified Holdings, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Compass Diversified Holdings.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CODI stock the variable cost ratio is equal to 93.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CODI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.3% for Compass Diversified Holdings.

Corporate tax rate of 27% is the nominal tax rate for Compass Diversified Holdings. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CODI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CODI are equal to 58.7%.

Life of production assets of 11.8 years is the average useful life of capital assets used in Compass Diversified Holdings operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CODI is equal to 22.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $856 million for Compass Diversified Holdings - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 60.119 million for Compass Diversified Holdings is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Compass Diversified Holdings at the current share price and the inputted number of shares is $1.0 billion.

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Stock chart of CODI Financial statements of CODI
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