On Wednesday, Deutsche Bank (ETR:DBKGn) adjusted its stance on Compass Minerals International (NYSE:CMP), a company listed on the New York Stock Exchange under the ticker NYSE:CMP. The firm's price target for the stock was reduced to $15 from the previous $25, but the Buy rating was maintained. This adjustment comes as the analyst applies a Sum-of-the-Parts (SOTP) analysis to the company's valuation.
The new price target of $15 is derived from a detailed component valuation, which considers different aspects of Compass Minerals' operations. The valuation includes a 6x EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple for the company's Salt segment and a 6.2x EBITDA multiple for Plant Nutrition. These multiples are consistent with the historical 3-year and 5-year ranges for these segments.
The analyst's commentary highlights the rationale behind the price target adjustment. The segments' valuations reflect their characteristics, which are considered to be low-growth but recession-resistant and noncyclical. This suggests a stable demand for the company's products regardless of economic fluctuations.
Additionally, the Fortress segment of Compass Minerals is valued at a 10x EBITDA multiple. This segment's higher valuation indicates its perceived strength and potential within the company's broader portfolio.
The reduction in the price target reflects a recalibration of expectations for Compass Minerals' stock, taking into account the current valuations of its distinct business segments. The continued Buy rating signals the firm's belief in the stock's potential despite the lowered price target.
InvestingPro Insights
Compass Minerals International (NYSE:CMP) has shown a mix of challenges and potential in its recent performance. According to InvestingPro data, the company has a market capitalization of $530.85 million, reflecting its position in the market. Despite a negative P/E ratio of -8.86 and a significant drop in revenue growth by -5.61% over the last twelve months as of Q1 2024, Compass Minerals maintains a dividend yield of 4.54%, demonstrating a commitment to shareholder returns.
From the perspective of InvestingPro Tips, the company is grappling with a significant debt burden and has been quickly burning through cash. However, analysts have a positive outlook for net income growth this year. The recent price decline, with the stock falling -24.73% over the last month and -58.16% over the last year, has led to the RSI suggesting the stock is in oversold territory, which might interest value-seeking investors.
For those seeking further insights and analysis, there are additional InvestingPro Tips available for Compass Minerals, which can be accessed through the InvestingPro platform. To enhance your investment research, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.