Compass Group (LSE:CPG) - Share price, News & Analysis

Q: What is the Fair Price of CPG when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

CPG (£16.92) is trading below our estimate of [[fair value]] (£18.83)

CPG fundamental analysis
Snowflake Score
Valuation	2/6
Future Growth	4/6
Past Performance	2/6
Financial Health	5/6
Dividends	0/6

CPG Stock Overview

Compass Group PLC operates as a food and support services company in North America, Europe, and internationally.

Rewards

Trading at 10.2% below our estimate of its fair value

Earnings are forecast to grow 17.5% per year

Became profitable this year

Risk Analysis

CPG passed our risk checks.

Compass Group Competitors

Greggs

LSE:GRG

UK£1.9b

Mitchells & Butlers

LSE:MAB

UK£1.2b

Domino's Pizza Group

LSE:DOM

UK£1.3b

Young's Brewery

AIM:YNGA

UK£581.4m

Price History & Performance

Summary of all time highs, changes and price drops for Compass Group
Historical stock prices
Current Share Price	UK£16.92
52 Week High	UK£18.42
52 Week Low	UK£13.96
Beta	0.93
1 Month Change	-6.00%
3 Month Change	2.51%
1 Year Change	11.14%
3 Year Change	-13.41%
5 Year Change	5.26%
Change since IPO	181.39%

Recent News & Updates

Jun 29

Calculating The Fair Value Of Compass Group PLC (LON:CPG)

Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Compass Group PLC...

May 28

We Think Compass Group (LON:CPG) Can Stay On Top Of Its Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the...

Shareholder Returns

	CPG	GB Hospitality	GB Market
7D	0.7%	0.5%	2.2%
1Y	11.1%	-15.8%	-6.8%

Return vs Industry: CPG exceeded the UK Hospitality industry which returned -15.8% over the past year.

Return vs Market: CPG exceeded the UK Market which returned -6.8% over the past year.

Price Volatility

Is CPG's price volatile compared to industry and market?
CPG volatility
CPG Average Weekly Movement	4.7%
Hospitality Industry Average Movement	5.5%
Market Average Movement	5.5%
10% most volatile stocks in GB Market	10.7%
10% least volatile stocks in GB Market	2.8%

Stable Share Price: CPG is not significantly more volatile than the rest of UK stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: CPG's weekly volatility (5%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1941	480,000	Dominic Blakemore	https://www.compass-group.com

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 Fundamentals Summary

How do Compass Group's earnings and revenue compare to its market cap?
CPG fundamental statistics
Market Cap	UK£30.44b
Earnings (TTM)	UK£734.00m
Revenue (TTM)	UK£20.97b

40.9x

P/E Ratio

1.4x

P/S Ratio

Is CPG overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
CPG income statement (TTM)
Revenue	UK£20.97b
Cost of Revenue	UK£17.21b
Gross Profit	UK£3.77b
Other Expenses	UK£3.03b
Earnings	UK£734.00m

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

Nov 21, 2022

Earnings per share (EPS)	0.41
Gross Margin	17.96%
Net Profit Margin	3.50%
Debt/Equity Ratio	59.5%

How did CPG perform over the long term?

See historical performance and comparison

Dividends

1.1%

Current Dividend Yield

57%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is CPG undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

2/6

Valuation Score 2/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for CPG?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for CPG. This is calculated by dividing CPG's market cap by their current preferred multiple.
What is CPG's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	UK£30.44b

CPG key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	1.6x
Enterprise Value/EBITDA	23.9x
PEG Ratio	2.3x

Price to Earnings Ratio vs Peers

How does CPG's PE Ratio compare to its peers?

CPG PE Ratio vs Peers

The above table shows the PE ratio for CPG vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	16.8x
GRG Greggs	16x	6.0%	UK£1.9b
MAB Mitchells & Butlers	7.8x	19.3%	UK£1.2b
DOM Domino's Pizza Group	14.1x	2.0%	UK£1.3b
YNGA Young's Brewery	26.8x	12.7%	UK£581.4m
CPG Compass Group	40.9x	17.5%	UK£30.4b

Forward PE

Price-To-Earnings vs Peers: CPG is expensive based on its Price-To-Earnings Ratio (40.9x) compared to the peer average (16.8x).

Price to Earnings Ratio vs Industry

How does CPG's PE Ratio compare vs other companies in the GB Hospitality Industry?

Price-To-Earnings vs Industry: CPG is expensive based on its Price-To-Earnings Ratio (40.9x) compared to the UK Hospitality industry average (14x)

Price to Earnings Ratio vs Fair Ratio

What is CPG's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

CPG PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	40.9x
Fair PE Ratio	47.8x

Price-To-Earnings vs Fair Ratio: CPG is good value based on its Price-To-Earnings Ratio (40.9x) compared to the estimated Fair Price-To-Earnings Ratio (47.8x).

Share Price vs Fair Value

What is the Fair Price of CPG when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: CPG (£16.92) is trading below our estimate of fair value (£18.83)

Significantly Below Fair Value: CPG is trading below fair value, but not by a significant amount.

Price to Earnings Growth Ratio

PEG Ratio: CPG is poor value based on its PEG Ratio (2.3x)

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Future Growth

How is Compass Group forecast to perform in the next 1 to 3 years based on estimates from 22 analysts?

Future Growth Score

4/6

Future Growth Score 4/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

17.5%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: CPG's forecast earnings growth (17.5% per year) is above the savings rate (0.9%).

Earnings vs Market: CPG's earnings (17.5% per year) are forecast to grow faster than the UK market (11% per year).

High Growth Earnings: CPG's earnings are forecast to grow, but not significantly.

Revenue vs Market: CPG's revenue (8.6% per year) is forecast to grow faster than the UK market (4.1% per year).

High Growth Revenue: CPG's revenue (8.6% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: CPG's Return on Equity is forecast to be high in 3 years time (23.9%)

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Past Performance

How has Compass Group performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

-27.7%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: CPG has high quality earnings.

Growing Profit Margin: CPG became profitable in the past.

Past Earnings Growth Analysis

Earnings Trend: CPG's earnings have declined by 27.7% per year over the past 5 years.

Accelerating Growth: CPG has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: CPG has become profitable in the last year, making it difficult to compare its past year earnings growth to the Hospitality industry (186.6%).

Return on Equity

High ROE: CPG's Return on Equity (13.7%) is considered low.

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Financial Health

How is Compass Group's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: CPG's short term assets (£5.0B) do not cover its short term liabilities (£5.6B).

Long Term Liabilities: CPG's short term assets (£5.0B) exceed its long term liabilities (£4.2B).

Debt to Equity History and Analysis

Debt Level: CPG's net debt to equity ratio (32%) is considered satisfactory.

Reducing Debt: CPG's debt to equity ratio has reduced from 121.4% to 59.5% over the past 5 years.

Debt Coverage: CPG's debt is well covered by operating cash flow (39.7%).

Interest Coverage: CPG's interest payments on its debt are well covered by EBIT (11.6x coverage).

Balance Sheet

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Dividend

What is Compass Group current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

1.11%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: CPG's dividend (1.11%) isn’t notable compared to the bottom 25% of dividend payers in the UK market (1.86%).

High Dividend: CPG's dividend (1.11%) is low compared to the top 25% of dividend payers in the UK market (5.17%).

Stability and Growth of Payments

Stable Dividend: CPG is not paying a notable dividend for the UK market, therefore no need to check if payments are stable.

Growing Dividend: CPG is not paying a notable dividend for the UK market, therefore no need to check if payments are increasing.

Earnings Payout to Shareholders

Earnings Coverage: CPG is not paying a notable dividend for the UK market.

Cash Payout to Shareholders

Cash Flow Coverage: CPG is not paying a notable dividend for the UK market.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

4.0yrs

Average management tenure

CEO

Dominic Blakemore (52 yo)

4.42yrs

Tenure

UK£3,211,000

Compensation

Mr. Dominic Blakemore serves as an Independent Non-Executive Director at London Stock Exchange Group Plc since January 01, 2020. Mr. Blakemore is the Group Chief Executive of Compass Group PLC since Januar...

CEO Compensation Analysis

Compensation vs Market: Dominic's total compensation ($USD3.89M) is about average for companies of similar size in the UK market ($USD5.17M).

Compensation vs Earnings: Dominic's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: CPG's management team is considered experienced (4 years average tenure).

Board Members

Experienced Board: CPG's board of directors are considered experienced (5 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: CPG insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/06/29 00:00
End of Day Share Price	2022/06/29 00:00
Earnings	2022/03/31
Annual Earnings	2021/09/30