Benchmark Analyst Raises Price Target on Composecure by 25%, Maintains Strong Buy Rating

Benchmark's Mark Palmer raised their price target on Composecure (NASDAQ: CMPO) by 25% from $8 to $10 on 2024/05/07. The analyst maintained their Strong Buy rating on the stock.

In their research note, Palmer highlighted several factors that contribute to their bullish view on Composecure. One of the key factors is the sizable amount of free cash flow generated by the company's premium metal payment card business. Palmer noted, "one of the factors underpinning Benchmark's bullish view on Composecure is the sizable amount of free cash flow generated by its premium metal payment card business."

Another factor that supports the analyst's positive outlook is the demonstration of how Composecure's strong free cash flow can translate into shareholder value, as evidenced by the company's performance in the first quarter of 2024. Palmer stated, "Another of those factors, the analyst continued, 'was Q1's demonstration of how the company's strong free cash flow can translate into shareholder value.'"

Composecure's first quarter results were impressive, with an increase in earnings per share (EPS) of 8.7% compared to the same period last year. The company reported EPS of $0.25, up from $0.23 in Q1 2023. Revenue also saw a healthy growth of 9.1%, reaching $104 million compared to $95.3 million in the first quarter of the previous year. Adjusted EBITDA increased by 6.5% to $37.8 million, up from $35.5 million in Q1 2023.

The positive financial performance of Composecure led to a significant jump in the company's share price following the announcement of a special dividend and the top- and bottom-line beats. Palmer acknowledged the impact of these developments, stating, "CompoSecure's announcement of a special dividend and the top- and bottom-line beats caused its share price to jump post-print."

Looking ahead, Composecure's management reiterated their guidance for the full year 2024. They expect revenue to range from $408 million to $428 million and adjusted EBITDA to be between $147 million and $157 million. The company's President & CEO, Jon Wilk, expressed optimism about the strong start in 2024 and the record quarter of revenue. Wilk emphasized the company's commitment to generating meaningful free cash flow and the doubling of their cash balance from the previous year.

The analyst consensus on Composecure is overwhelmingly positive, with 100% of top-rated analysts currently rating the stock as a Strong Buy or Buy. No analysts see it as a Hold, and none recommend or strongly recommend selling the stock.

Since Composecure's latest quarterly report on 2024/05/06, the stock price has shown resilience, with a 3.9% increase. On a year-over-year basis, the stock has gained 4.1%. However, it is worth noting that during this period, Composecure has trailed behind the S&P 500, which has seen a significant increase of 25.4%.

Benchmark analyst Mark Palmer, who issued the upgraded price target and maintained the Strong Buy rating on Composecure, is highly regarded among Wall Street analysts. According to WallStreetZen, Palmer is ranked in the top 9% out of 4,577 analysts, with an average return of 11.9% and a win rate of 52.7%. Palmer specializes in the Technology and Consumer Defensive sectors, among others.

Composecure, Inc. is a company that manufactures metal, plastic, composite ID, and proprietary financial transaction cards. They are based in Somerset, NJ and operate both in the U.S and internationally. In addition to their card manufacturing business, Composecure also offers the Arculus Cold Storage Wallet, a three-factor authentication solution for securely storing cryptocurrency and digital assets.

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