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One FTSE 100 development inventory with wonderful previous operational and share value performances is Compass Group (LSE: CPG).
This factor simply appears to maintain going up! Due to this fact, the corporate deserves a more in-depth look.
Constant efficiency
It’s the world’s largest contract caterer and operates in additional than 50 nations. The enterprise is concerned in formal eating companies, eating places, cafés, merchandising and different hospitality companies. But it surely additionally gives help companies corresponding to venture administration, safety, transport, upkeep, logistics, cleansing and different issues.
All these things goes on in leisure venues, colleges, hospitals, oil rigs, company headquarters, and different locations the place folks collect.
This isn’t a whizzy-dizzy tech operation, or some biopharmaceutical enterprise that’s going to alter the world. Nevertheless, there’s nothing boring concerning the firm’s buying and selling and monetary efficiency over the previous few years.
For a big-cap operation, it’s obtained one of the crucial constant and spectacular monetary development data I’ve seen. This desk tells the story:
| Yr to September | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024(e) | 2025(e) |
| Normalised earnings per share | 74.3p | 83.8p | 23.4p | 31.9p | 65p | 80.1p | 94.7p | 105p |
| Earnings per share development | 4.27% | 12.8% | (72.1%) | 36.5% | 104% | 23.2% | 18.1% | 10.7% |
| Dividend per share | 37.7p | 40p | 0 | 14p | 31.5p | 43.1p | 47.7p | 53.2p |
| Dividend development | 11.1% | 6.1% | (100%) | N/A | 125% | 36.8% | 10.7% | 11.6% |
The enterprise was affected in 2020 when the pandemic struck, as we’d anticipate. However earnings and the dividend have come storming again.
A development runway forward
There isn’t a yr of contraction in any of the figures, aside from 2020. By 2023, earnings and the dividend exceeded pre-pandemic ranges.
The agency’s good efficiency reveals within the share value chart:
I believe its previous glories are necessary to contemplate. However what actually issues for shareholders is what’s going to occur subsequent.
final week’s half-year outcomes announcement accommodates extra robust buying and selling and monetary figures, and chief govt Dominic Blakemore delivered a constructive outlook assertion.
The corporate raised its steerage for underlying working revenue development to round 15% for the complete yr.
Past that, Blakemore stated the agency will probably obtain mid-to-high single-digit share natural income development. That may probably allow revenue to develop forward of income development.
Progress has been each natural and by way of bolt-on acquisitions. Nevertheless, the corporate’s debt stage’s modest. That implies the administrators have been ploughing the agency’s gushing torrent of rising money circulate again into operations to finance development.
Valuation
To date, so good. Compass seems prefer it’s been doing precisely what profitable, rising companies ought to be doing as they develop. So what’s the catch?
One danger for brand new shareholders is the valuation. With the share value close to 2,248p (16 Could), the forward-looking price-to-earnings (P/E) a number of is simply over 21 for 2025. That compares to the FTSE 100’s P/E of simply over 14.
Constant development is reassuringly costly, it appears. However Compass demonstrated its cyclical vulnerability throughout the pandemic. If we see one other comparable financial shock, and even only a downturn, buyers may lose cash on the inventory.
However, regardless of the dangers, I believe Compass shares are value contemplating for a diversified portfolio earlier than Could is over.
