GCIShore Capital sees potential for further upgrades at Compass
Shore Capital has reiterated its 'buy' rating for after a report of strong third-quarter trading from the catering giant, saying it expects consensus forecasts to be revised higher following the update.
Analyst Greg Johnson labelled Tuesday's update as "robust", with the company now guiding to full-year organic revenue and operating profit growth above previous guidance of 10% and 15% respectively.
Organic revenues were up 10.3% year-on-year in the third quarter. "Although this reflects an expected modest slowdown on H1, it was comfortably stronger than our expectations of c.9%," Johnson said.
On Shore Capital estimates, Compass's shares are trading at 22 times estimated earnings for 2025, an enterprise value-to-EBITDA ratio of 11 and a free cash flow yield of 4%.
"Such metrics are consistent with historic trends, although we believe that the group can sustain elevated rates of growth through continued favourable outsourcing trends," Johnson said.
"Our DCF derived fair value suggests c£26 per share, although this could prove conservative given scope for continued upgrades and building excess capital on the balance sheet."
The stock was up 5% at 2,299p by 0952 BST.
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