On Wednesday, BMO Capital Markets adjusted its outlook on Compass Minerals International (NYSE:CMP), reducing the company's price target from $20.00 to $18.00, while retaining a Market Perform rating on the stock.
The revision follows the release of the company's delayed fourth-quarter financial results for fiscal year 2024, which ended in September. With a market capitalization of $544.6 million and trading near $13.14, the stock has declined over 50% in the past year. According to InvestingPro analysis, the company's overall financial health score is rated as "FAIR."
The firm cited the restatements and the provided midpoint Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) guidance for fiscal year 2025, which aligns with their estimates at $189 million.
This figure is lower year-over-year compared to fiscal year 2024's EBITDA of $178.7 million but is approximately $10 million higher than the consensus. InvestingPro data reveals that three analysts have recently revised their earnings expectations downward, though net income is expected to grow this year.
Compass Minerals' management is actively working on normalizing inventory levels and improving both working capital and cost performance. However, according to BMO Capital, these efforts are expected to require additional time to fully materialize.
The firm also expressed uncertainty regarding the existence or potential of a significant acquisition offer for the company. InvestingPro analysis indicates the company is currently operating with a significant debt burden and is quickly burning through cash, though its liquid assets exceed short-term obligations with a current ratio of 2.71.
BMO Capital based its price target on an estimated 8.5 to 9 times enterprise value to EBITDA (EV/EBITDA) multiple for the year 2025, but it anticipates a 7 times multiple for 2026, assuming a more normalized EBITDA in the low- to mid-$200 million range. This forward-looking valuation reflects the firm's tempered expectations for Compass Minerals' financial performance in the coming years.
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