Compass Group Shares (LON:CPG) Gain as Citi Upgrade to ‘Buy’

Compass Group shares (LON: CPG) are rebounding from recent lows, up 0.63% today, and buoyed by an upgrade from Citi. The upward revision has sparked increased market interest, contributing to a notable, if nascent, recovery in the stock's performance.

The stock has faced headwinds this year, experiencing a year-to-date decline of over 11%. However, the recent shift in sentiment comes as Citigroup raised its rating on Compass Group to ‘Buy' from ‘Neutral,' simultaneously increasing the price target to 3,000 GBp from the previous 2,750 GBp. This adjustment reflects an expectation of “sustainable growth” and margin expansion potential extending into 2026, spurred by strategic acquisitions undertaken by the company.

Citigroup's analysis points to robust underlying fundamentals within Compass Group, suggesting a capacity for sustained financial performance in the coming years. A key factor influencing the upgrade is the anticipation of resumed share buybacks in November 2026, which could provide further support to the stock price and enhance shareholder value. This prospective capital allocation strategy signals management's confidence in the company's cash-generating abilities and future earnings potential.

Goldman Sachs Research also added to the positive momentum earlier in November, upgrading Compass Group to ‘Buy' with an identical 12-month price target of 3,000 GBp. Goldman Sachs highlighted what they saw as an attractive entry point, given the stock's approximate 10% de-rating this year based on next-twelve-months EV/EBITA.

The firm anticipates Compass Group will surpass expectations regarding mid-term profit growth from fiscal year 2026 onwards, projecting an EBITA compound annual growth rate (CAGR) of approximately 9% for the period spanning fiscal years 2025-29. This upgrade is rooted in a strengthened conviction in Compass Group's capacity to maintain structurally elevated long-term EBITA growth, driven by factors such as increased net new business, modest like-for-like growth, and ongoing margin improvements.

Adding to the chorus of positive assessments, Berenberg Bank reiterated its ‘Buy' rating on Compass Group in October, maintaining a price objective of 3,000 GBp. This reiteration underscores a sustained confidence in Compass Group's strategic direction and overall financial health.