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On Friday, Citi analyst Leo Carrington adjusted the price target for Compass Group PLC (LON:CPG:LN) (OTC: CMPGY) shares, reducing it to GBP26.50 from the previous GBP27.00, while maintaining a Neutral rating on the stock. Currently trading at $35.09, near its 52-week high of $36.33, InvestingPro analysis suggests the stock is fairly valued. The revision follows the company’s H1 results, which Carrington noted continued Compass’s pattern of strong performance.
Compass Group’s half-year results showed promising signs, with the analyst highlighting several key points. With impressive gross profit margins of 72.78% and revenue growth of 9.58% over the last twelve months, the company’s growth in North America for the second half of 2025 is expected to align with the underlying trends observed in the first quarter, despite the leap-year comparable and weather impacts in the second quarter. Additionally, the company’s future demand looks positive, underscored by a significant increase in Annualized Revenue Opportunity (ARO) over the past 12 months, which exceeds the new business reported in the profit and loss statement.
The firm’s retention rate was reported at 96.2%, which is considered robust, and discussions about a forward-looking retention metric suggest this figure could remain stable or potentially improve. Moreover, recent acquisitions, including CH&Co and Hofmann, have been performing well, contributing to the company’s strength.
Carrington also pointed out that while Compass Group has considerable opportunities for growth, the management’s strategy is to expand consistently without the need for excessive investment in the cost base. This approach is favorable for returns but indicates that there may not be a significant acceleration in net new business in the mid-term. With a market capitalization of $59.65 billion and an overall financial health score rated as "GOOD" by InvestingPro, the company appears well-positioned to execute its strategic plans.
In other recent news, Compass Group’s first-half results revealed a strong performance, particularly in North America, where the company showed notable client retention. Jefferies has maintained its Buy rating on Compass Group, with a price target of GBP30.00, following these results. The analysis highlights the company’s success in securing new outsourcing contracts and gaining market share, contributing to its industry-leading growth. Despite recent concerns, the company’s unchanged full-year guidance suggests a strategic approach to managing expectations. The Jefferies analyst expressed confidence in the potential for Compass Group’s stock to undergo a positive re-rating. This optimism is based on the recent 10-15% decline in its share price, which is seen as an attractive opportunity for investors. Compass Group’s solid performance and strategic guidance underscore its robust business model amidst market uncertainties. Investors are likely to watch closely to see if the company can capitalize on the opportunities highlighted by Jefferies.
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