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1. Company Snapshot

1.a. Company Description

Compass Group PLC operates as a food and support services company in North America, Europe, and internationally.The company offers support services, such as cleaning in hospitals; reception services at corporate headquarters; managing remote camps; grounds and facilities services at schools and universities; and others.It serves business and industry; healthcare and senior living market; education; sports and leisure; and defense, offshore, and remote sectors.


Compass Group PLC was founded in 1941 and is based in Chertsey, the United Kingdom.

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1.b. Last Insights on CPG

Compass Group's recent performance was negatively impacted by rising costs and pricing issues in the US Healthcare/Hospital Food Services market. The company's growth is being challenged by workforce shortages and increasing demand for enhanced patient food experiences and personalized dietary options. Additionally, the UAE Cleaning Services market is facing stringent hygiene and regulatory standards, which may impact Compass Group's operations in the region.

1.c. Company Highlights

2. Compass Group's Strong FY2025 Results Driven by Organic Growth and Margin Progress

Compass Group reported a robust financial performance for FY2025, with profit increasing by nearly 12% to over $3.3 billion, driven by organic growth and margin progress. The company's earnings per share rose by 11% in constant currency to $0.51, in line with analyst estimates. The operating profit increased by 12%, with interest charges expected to be around $350 million in fiscal year '26. The company generated $2 billion of free cash flow, a significant milestone, and net new business growth was 4.5%, with strong new business wins and client retention of over 96%.

Publication Date: Nov -26

📋 Highlights
  • Profit Surge: Operating profit rose 12% to $3.3B, driven by margin progress and organic growth
  • Free Cash Flow Milestone: Generated $2B in free cash flow, reflecting strong operational efficiency
  • Regional Growth Disparity: North America saw 9% organic revenue growth vs. 8% in International, with profit gains of 11% and 13% respectively
  • New Business Momentum: Net new business growth hit 4.5%, with secured new business up 11% to $3.8B and a 96% retention rate
  • Addressable Market Expansion: Acquired expertise expanded TAM by $40B, targeting a $360B food services market and $800B FM sector

Regional Performance

The company's regional performance was strong, with North America seeing organic revenue growth of 9% and operating profit up nearly 11%, while International had organic revenue growth of 8% and strong profit growth of 13%. The company's business model combines localized approaches with the benefits of scale, particularly in food procurement and technology, and it has a significant market opportunity, with an addressable market worth around $360 billion in food services alone.

Growth Prospects and M&A

Compass expects operating profit growth of around 10% in 2026, driven by organic revenue growth of 7%, M&A contributions of 2%, and ongoing margin improvement. The company is confident in its growth algorithm and long-term compounding shareholder returns. It continues to invest organically and through M&A to accelerate sub-sectorization, with targets for acquisitions usually sourced locally and having been known to Compass for several years. The company has invested in technology and data to support sales processes, procurement functions, and operational efficiencies.

Valuation

Using the current valuation metrics, the company's P/E Ratio stands at 36.03, indicating a relatively high valuation. However, the ROE of 18.58% and ROIC of 11.84% suggest that the company is generating strong returns on equity and invested capital. The Dividend Yield is 2.32%, and the Free Cash Flow Yield is 5.01%, indicating a decent return for shareholders. Analysts estimate next year's revenue growth at 11.1%, which may justify the current valuation.

Outlook

The company's guidance assumes Vermaat's contribution as of the first quarter of '26 and a net finance cost of $350 million, which includes Vermaat's numbers and some M&A. The EPS accretion of the Vermaat deal is expected to be positive on a full-year basis, with further accretion expected in years 2 and 3. With a strong track record of growth and a confident outlook, Compass Group is well-positioned to continue delivering value to shareholders.

3. NewsRoom

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FTSE 100 Live: Blue-chip index flat; banks and builders on the march

Nov -27

Source: proactiveinvestors.com

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FTSE 100 Live: London index dragged down by ex-divs and tobacco stocks

Nov -27

Source: proactiveinvestors.com

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Compass Group PLC (CMPGF) (Full Year 2025) Earnings Call Highlights: Strong Profit Growth and ...

Nov -25

Source:

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OTC Markets Group Welcomes Compass Group PLC to OTCQX

Nov -25

Source:

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Food service workers at Humber College prepare for potential strike

Nov -19

Source:

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What Catalysts Are Shaping the Evolving Narrative for Compass Group?

Nov -16

Source:

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Is Kohl's (KSS) Stock Outpacing Its Retail-Wholesale Peers This Year?

Oct -23

Source: zacks.com

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How Recent Analyst Moves Are Shaping the Story for Compass Group’s Valuation

Oct -18

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.50%)

6. Segments

Business & Industry

Expected Growth: 8.0%

The Business & Industry segment is expected to grow at a rate higher than the global average due to the increasing trend of outsourcing and the growing demand for convenient food options. The segment is also less likely to be affected by economic downturns as companies continue to outsource their food services.

Healthcare & Senior Living

Expected Growth: 9.0%

The Healthcare & Senior Living segment is expected to grow at a rate higher than the global average due to the increasing demand for healthcare services and the growing aging population. The segment is also driven by the need for specialized food services in healthcare settings.

Education

Expected Growth: 7.0%

The Education segment is expected to grow at a rate slightly lower than the global average due to budget constraints in educational institutions. However, the growing demand for healthy and nutritious food options is driving growth in this segment.

Sports & Leisure

Expected Growth: 8.5%

The Sports & Leisure segment is expected to grow at a rate higher than the global average due to the growing demand for food and beverage options at sports and leisure venues. The segment is also driven by the trend of venues looking to improve their food services.

Defence, Offshore & Remote

Expected Growth: 6.0%

The Defence, Offshore & Remote segment is expected to grow at a rate lower than the global average due to the volatility of demand in this segment. However, the need for specialized food services in these settings is driving growth.

Unallocated Share of Revenue of Joint Ventures

Expected Growth: 7.5%

The Unallocated Share of Revenue of Joint Ventures segment is expected to grow at the global average rate as it is driven by the performance of the joint ventures.

7. Detailed Products

Foodservice

Compass Group provides foodservice solutions to various industries, including business and industry, education, healthcare, and sports and leisure.

Support Services

Compass Group offers support services, including facilities management, cleaning, and maintenance, to clients across various sectors.

Catering

Compass Group provides catering services to clients in various industries, including corporate events, weddings, and other special occasions.

Vending

Compass Group offers vending services, providing snack and beverage machines to clients across various industries.

Sports and Leisure

Compass Group provides food and beverage services to sports and leisure venues, including stadiums, arenas, and theme parks.

Healthcare

Compass Group provides healthcare services, including patient dining, retail, and catering services, to hospitals and healthcare facilities.

Education

Compass Group provides foodservice and support services to educational institutions, including schools and universities.

8. Compass Group PLC's Porter Forces

Forces Ranking

Threat Of Substitutes

Compass Group PLC operates in a industry with moderate threat of substitutes. While there are some substitutes available, they are not a significant threat to the company's business.

Bargaining Power Of Customers

Compass Group PLC has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's strong brand reputation and quality of services also limit the bargaining power of customers.

Bargaining Power Of Suppliers

Compass Group PLC has a moderate bargaining power of suppliers. While the company has some negotiating power due to its large scale, suppliers also have some bargaining power due to the specialized nature of some of the services provided.

Threat Of New Entrants

The threat of new entrants is low for Compass Group PLC due to the high barriers to entry in the industry. The company's strong brand reputation, large scale, and established relationships with customers also make it difficult for new entrants to gain a foothold.

Intensity Of Rivalry

The intensity of rivalry in the industry is high, with several large players competing for market share. Compass Group PLC faces intense competition from other foodservice and support services companies, which can lead to pricing pressure and reduced margins.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 45.66%
Debt Cost 5.65%
Equity Weight 54.34%
Equity Cost 7.78%
WACC 6.81%
Leverage 84.01%

11. Quality Control: Compass Group PLC passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Ibersol

A-Score: 6.9/10

Value: 6.4

Growth: 3.6

Quality: 3.4

Yield: 10.0

Momentum: 9.0

Volatility: 9.0

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BMW

A-Score: 6.3/10

Value: 9.1

Growth: 5.6

Quality: 2.5

Yield: 8.8

Momentum: 6.5

Volatility: 5.7

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VW

A-Score: 6.3/10

Value: 10.0

Growth: 3.6

Quality: 2.4

Yield: 10.0

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A-Score: 6.3/10

Value: 8.9

Growth: 4.9

Quality: 3.3

Yield: 10.0

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Volatility: 7.3

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Inditex

A-Score: 5.9/10

Value: 3.6

Growth: 6.2

Quality: 8.6

Yield: 6.2

Momentum: 3.0

Volatility: 8.0

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Compass Group

A-Score: 5.4/10

Value: 2.6

Growth: 7.2

Quality: 4.9

Yield: 3.1

Momentum: 5.0

Volatility: 9.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

23.7$

Current Price

23.7$

Potential

-0.00%

Expected Cash-Flows