We feel now is a pretty good time to analyse Compass Diversified's (NYSE:CODI) business as it appears the company may be on the cusp of a considerable accomplishment. Compass Diversified is a private equity firm specializing in add on acquisitions, buyouts, industry consolidation, recapitalization, late stage and middle market investments. The US$1.8b market-cap company announced a latest loss of US$124m on 31 December 2023 for its most recent financial year result. The most pressing concern for investors is Compass Diversified's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Compass Diversified is bordering on breakeven, according to the 7 American Diversified Financial analysts. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$74m in 2024. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 112% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

We're not going to go through company-specific developments for Compass Diversified given that this is a high-level summary, but, bear in mind that typically 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 debt-to-equity ratio of 110%. Typically, debt shouldn't exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of Compass Diversified to cover in one brief article, but the key fundamentals for the company can all be found in one place – Compass Diversified's company page on Simply Wall St. We've also put together a list of pertinent factors you should look at:

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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.