Should You Investigate Compass Group PLC (LON:CPG) At UK£20.92?

Compass Group PLC (LON:CPG) saw a double-digit share price rise of over 10% in the past couple of months on the LSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Compass Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Compass Group

What's The Opportunity In Compass Group?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.7% below my intrinsic value, which means if you buy Compass Group today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth £22.67, then there’s not much of an upside to gain from mispricing. In addition to this, Compass Group has a low beta, which suggests its share price is less volatile than the wider market.

What does the future of Compass Group look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Compass Group's earnings over the next few years are expected to increase by 63%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? CPG’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on CPG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Compass Group, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Compass Group and we think they deserve your attention.

If you are no longer interested in Compass Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.