InvestingPro Valuation Reveals CMP's Deep Value Opportunity & 62% Surge Drivers

Based on my multi-dimensional analysis, I will explain in detail how InvestingPro’s fair value analysis reveals the valuation opportunity of Compass Minerals (CMP) and the key factors driving its stock price volatility:

InvestingPro’s fair value analysis uses a multi-scenario DCF model, whose core framework includes:

:

• Cash Flow Discounting
  : Discount future free cash flows using WACC (Weighted Average Cost of Capital). For CMP, the current WACC is 10.5% and Beta coefficient is 1.57, indicating high volatility
• Multi-scenario Modeling
  : Conservative, neutral, and optimistic scenarios cover different growth assumptions:
  • Conservative Scenario
    : 0% revenue growth, fair value $66.19 (+237% upside)
  • Neutral Scenario
    :10.4% revenue growth (based on 5-year average), fair value $76.76 (+291% upside)
  • Optimistic Scenario
    :13.4% revenue growth, fair value $107.01 (+445% upside)
  • Probability-weighted Value
    : $83.32 (+324% overall upside)

:

• Market Pricing Distortion Detection
  : When the market price is more than 50% below the model’s fair value, a significant undervaluation signal is triggered
• Cyclical Factor Adjustment
  : Adjust cash flow distribution for seasonal characteristics of the salt industry (peak demand in winter)
• Turnaround Premium
  : Consider the expectation of loss reversal for transforming enterprises and grant an additional valuation premium

:

1. Relative Valuation Method Signals
   :
   • Abnormal EV/EBITDA Multiple
     : Current 8.41x, significantly lower than the historical average of 15-20x
   • P/B Ratio Inversion
     : P/B 3.53x but ROE -32.46%, indicating the market overprices distress risk
   • Peer Company Comparison
     : Compared to K+S (German potassium salt) at 12x EV/EBITDA, CMP is discounted by over 40%

2. Absolute Valuation Method Verification
   :
   • Free Cash Flow Improvement
     : Latest FCF reaches $128M, FCF Margin turns positive (specific value not provided, but trend is clear)
   • WACC Sensitivity
     : Debt cost decreases from 8.6% (conservative) to 6.6% (optimistic), significantly boosting valuation
   • Terminal Growth Rate
     : Assumed range of 2.0%-3.0%, reflecting long-term stability of salt demand

• Q4 2025 Earnings Beat Expectations
  :
  • Adjusted EBITDA reaches $41.6M, +166% YoY (previous $15.6M) [News/Brokerage Tools]
  • Net loss narrows to $7.2M (previous $48.3M), improvement of 85% [News/Brokerage Tools]
  • Salt business revenue grows13% to $1.0225B, plant nutrition business revenue +14% to $206.3M [News/Brokerage Tools]
• ‘Back to Basics’ Strategy Takes Effect
  : Management focuses on core salt and plant nutrition businesses, streamlines operational structure, and improves operational efficiency

• DCF Assumption Revision
  :
  • Revenue growth expectation raised from negative to10.4% (5-year CAGR)
  • EBITDA Margin expectation recovered from low levels to7.9% (historical average)
  • WACC Reduction Assumption: Debt cost decreases from 8.6% to 7.6% under deleveraging path
• Market Consensus Shift
  : Analyst ratings shift from ‘Hold/Reduce’ to ‘Buy’, median target price $23 (+17.1% upside) [Brokerage Tools]

• Board Restructuring
  :4 new directors appointed in December2025, including salt industry expert Mark Roberts (former Morton Salt CEO), enhancing industry experience [News Tools]
• 2026 Guidance Release
  : Adjusted EBITDA target of $200-240M, implying YoY growth of +68% to +101% [News Tools]
• Koch Strategy Shift
  : Largest shareholder Koch Minerals gives up board seat, showing support for the company’s transformation strategy [News Tools]

:

• Short Interest Ratio
  : High short interest ratio of8.15%, triggering forced liquidation when fundamental improvement signals are clear
• Liquidity Squeeze
  : Average daily volume456K, but volume surged3x on the day of the 62% rise, triggering a liquidity trap

:

• Beta Characteristics
  : Beta of 1.57 (or1.18 from different sources) causes stock price to overshoot when risk appetite rebounds
• Momentum Strategy Follow-up
  : After breaking through the key resistance level of $20, algorithmic trading by quantitative funds accelerates the rise

###1. Theoretical Value and Practical Application

:

• Distressed Enterprise Valuation
  : DCF effectively handles the valuation challenge of loss-making companies through multi-scenario analysis
• Cyclical Adjustment
  : Adjust cash flow distribution for the seasonality of the salt industry (winter de-icing demand)
• Dynamic WACC
  : Consider the improvement impact of capital structure optimization (deleveraging) on the discount rate

:

• Assumption Sensitivity
  : Fair value range of $66-$107, highly dependent on growth rate and terminal value assumptions
• Neglect of Competitive Landscape
  : Fails to fully consider external threats such as the impact of Chinese salt exports
• Regulatory Risk
  : Tightening environmental policies may increase salt production costs

###2. Investment Decision Framework

:

• Deep Value Investing
  : When market capitalization is below 5x FCF (CMP’s current FCF is $128M, market cap is $821M, about 6.4x)
• Special Situation Investing
  : Catalyst events such as management changes and strategic transformations
• Contrarian Strategy
  : When the market overprices distress risk (e.g., CMP’s ROE of-32.46%)

:

• Diversified Investment
  : Position in a single distressed stock should not exceed5%
• Stop-loss Discipline
  : Exit in time when core assumptions (e.g., EBITDA growth) are not met
• Hedging Tools
  : Use put options to protect against downside risk

The62% single-day surge of Compass Minerals is essentially the result of the triple resonance of

. InvestingPro’s DCF analysis, through the cross-validation of , identified the market’s overly pessimistic pricing of distressed enterprises in advance. The key drivers come from . These fundamental improvements are translated into a huge gap between the fair value range of $66-$107 and the current price of $19.64 through the valuation model. For investors, this case demonstrates the effectiveness of , while also reminding them of the .

[0] Jinling API Data - CMP company financial data, DCF valuation, price history, analyst consensus, etc.
[1] Investing.com - “Compass Minerals surges62% after InvestingPro’s Fair Value analysis” (https://www.investing.com/news/investment-ideas/compass-minerals-surges-62-after-investingpros-fair-value-analysis-93CH-4427229)
[2] Compass Minerals official news - “Compass Minerals Reports Fiscal2025 Fourth-Quarter and Full-Year Results” (https://www.compassminerals.com/info/news/compass-minerals-reports-fiscal-2025-fourth-quarter-and-full-year-results/)
[3] Investing.com - “Compass Minerals appoints four new directors in board refreshment” (https://www.investing.com/news/company-news/compass-minerals-appoints-four-new-directors-in-board-refreshment-93CH-4416367)
[4]247 Wall St. - “Compass Minerals Narrows Losses65% as Revenue Climbs but Investors Stay Cautious” (https://247wallst.com/investing/2025/12/09/compass-minerals-narrows-losses-65-as-revenue-climbs-but-investors-stay-cautious/)
[5] GuruFocus - “Q42025 Compass Minerals International Inc Earnings Call Transcript” (https://www.gurufocus.com/news/3239837/q4-2025-compass-minerals-international-inc-earnings-call-transcript)
[6] Seeking Alpha - “Compass Minerals outlines $200M-$240M adjusted EBITDA guidance for 2026” (https://seekingalpha.com/news/4529761-compass-minerals-outlines-200m-240m-adjusted-ebitda-guidance-for-2026-as-company-resets)