Broker snap: Compass points north

12th May 2010 11:12

Compass has rallied to its highest level since 2001 following "excellent" interim results which beat market expectations, prompting analysts to put their shares on the menu.The firm grew profit before tax by 19% to £459m during the first six months and underlying profit by 14% to £462m. Reported revenue rose nearly 3% to £7.1bn.Charles Stanley analyst Tony Shepard expects revenue growth to return to historic levels of about 5% per annum over the medium term.He has upped earnings per share estimates for the year to September 2010 to about 35p from 34p to reflect the "excellent" first half results and improved trading, although the prospective P/E of about 15x still appears to be at a discount to Sodexo at 18x. "With Compass' revenue trends improving, more to come from efficiencies and a boost from bolt-on acquisitions the outlook for 2011 and beyond is promising," Shepard said. Jonathan Jackson, head of equities at Killik Capital, agrees."We expect to see upgrades to forecasts today and believe there will be further upward pressure to earnings over the next two years," he told clients Wednesday."Although the shares have performed well over the last year, they are still trading on only 14.1x September 2011 earnings, and below Sodexo, its global peer, on 16.3x.""We remain positive on the shares."