Broker snap: Revenue growth to continue at Compass

30th Sep 2010 11:58

Charles Stanley has reiterated its recommendation to buy shares in Compass Group after the catering giant released what the broker described as a 'pleasing trading statement'.'A key point in today's announcement is the improvement in organic revenue growth. This has showed a good recovery from the recession which caused organic revenue to stall in 2009 but this year it is expected to advance by 3% and the current run rate is about 5% which sets the group up for a good year in 2011," said Charles Stanley analyst Tony Shepard. The broker is forecasting a pre-tax profit for 2010 of £900m and EPS of 35p, putting it a tad below market consensus of £905.7m and 35.34p, but it still represents healthy earnings growth of 16.7% over 2009."In 2011, this rate of growth should continue and we estimate the shares trade on a forward P/E [price/earnings ratio] of 15.7x for 2010 and 13.7x for 2011. The dividend yield is about 2.8%. The Compass Group share price has outperformed the general market by about 30% over the last 12 months and our recommendation on Compass Group remains a Buy," the broker concluded.