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Compass's slide represents buying opportunity, Citi suggests

Results yesterday failed to wow, knocking the shares lower still and firmly into buying territory, in Citi's view
Tuck in, is Citi's advice

Compass Group PLC (LON:CPG) has fallen almost 15% since its early October peak, and Citi thinks now would be a good time to buy.

The contract caterer took another biffing yesterday after it served up slightly lukewarm full-year results, and Citi notes that it is now trading close to its long-term average price/earnings (PE) ratio of 17.4, having derated since the Brexit vote by a couple of points to a PE of 18.4 times projected earnings for the current year.

“Rising bond yields have in part driven this sell-off from quality growth names but it also reflects only in-line [fiscal 2016] results from contract catering peers and some shorter-term weakness, especially in extraction [i.e. mining, oil & gas] industry-related business,” in Citi’s view.

The broker likes the robust free cash flow yield of 4.5% and the strong growth outlook, not to mention its near 60% exposure to US dollar revenues.

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Compass Group Timeline

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