Broker snap: Compass to see growth in the medium-term

7th Dec 2010 11:05

Nomura foresees further medium-term growth from Compass Group as the contract caterer is set to benefit from its 2010 acquisitions.Nomura's forecast for 2011 earnings before interest and tax has been increased by 1-2% as Nomura incorporates the annualised contribution, equating to £10m, from Compass's current year acquisitions.Last week, the group announced its latest purchase with the acquisition of Aussie food service business Life's A Party Group for £14.1m, providing the opportunity for expansion in the education and leisure sectors.For the next five years, the consensus of compound annual growth rate (CAGR) for earnings per share (EPS) stands at 9%, reaching an EPS of 60p by 2016. However, when incorporating acquisitions Nomura predicts CAGR will likely reach 14% with an EPS of 78p by the period end.For now, the broker predicts a CAGR EPS of 11% for the period, with an estimated EPS of 68p in 2016. Analyst Simon Larkin says that Compass "has cyclical, structural and capital opportunities to drive further medium-term growth."The broker confirms a 'buy' rating along with a 690p target price.