Stock in Focus: Compass Group

Growing demand for corporate outsourcing will support longer-term opportunities for food-service company Compass Group, say equity analysts

Barbara Noverini 2 April, 2015 | 11:04AM

Compass Group (CPG) is one of the largest and most entrenched players in the food-service industry. The company's extensive global footprint serves a diversified mix of sectors and geographies, providing the foundation for a narrow economic moat that produces steady revenue streams and strong cash flows. Combining this dynamic with an asset-light operating structure leads to strong returns on invested capital.

The company's business is moderately tied to both consumer and enterprise-level discretionary spending, which adds some cyclicality. Nevertheless, we believe Compass Group is well positioned to grow as enterprise-level outsourcing gains traction longer term.

The majority of Compass' revenue comes from the business and industry division, which manages corporate cafeterias. Typically provided as an employee perk, in-house food service also has the potential to boost overall productivity by lessening the number of hours employees spend off campus.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Compass Group PLC1,394.50 GBX-1.10

About Author

Barbara Noverini  Barbara Noverini is an equity analyst for Morningstar, covering business services firms on the industrials team.

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