Compass Group Downgraded by RBC Capital to 'Sector Perform' with GBP24.00 Price Target
In a recent development, Compass Group (LON::LN) (OTC: CMPGY) has been downgraded by RBC Capital from 'Outperform' to 'Sector Perform' while maintaining a price target of GBP24.00. This decision comes as the stock has seen a 15% increase year-to-date, outperforming the local index and ranking high in the Pan-Euro Business Services sector in terms of total shareholder return (TSR).
The analyst at RBC Capital noted Compass Group's resilience and structural growth characteristics, as well as its defensive earnings profile. Despite these positive attributes, the current share price, which aligns with RBC Capital's unchanged price target and exceeds the company's 10-year adjusted price-to-earnings (P/E) average, suggests a more moderate growth outlook for the stock.
Currently, Compass Group is trading at a P/E multiple of around 26 times for the 2024 calendar year and approximately 23 times for 2025. These figures are significantly higher than the company's 10-year rolling forward average P/E, which is just under 21 times excluding years affected by lockdowns.
RBC Capital's price target of 2,400 pence (GBP24.00) takes into consideration Compass Group's leading position in organic growth and margins, along with optimistic assumptions for medium-term and terminal growth. The firm believes that further increasing the price target may not be justified at this point, indicating that the current valuation adequately reflects the company's growth prospects.
In conclusion, investors should take note of Compass Group's recent downgrade by RBC Capital and consider the implications of the maintained price target. This analysis provides valuable insights into the stock's performance and growth outlook, helping investors make informed decisions about their portfolios.