Compass Group PLC (LSE:CPG) shares rose 1.7% on Tuesday and analysts at Bank of America think there is more to come.
The bank has reinstated coverage of the food services firm with a 'buy' rating and a price target of 2,300p, against today’s share price of 2,101p.
BofA explained Compass is the global market leader in the still-underpenetrated food services industry.
It has a proven record of superior execution, unique scale benefits in structurally higher-growth North America, and procurement benefits in food and beverage.
This is well-evidenced by sector-leading organic growth, which the broker put at on average 250bps higher than peers, and return on capital employed 500bps above Sodexo historically.
Its strong balance sheet and cash conversion leave room for incremental share buybacks, with total cash returns potentially reaching 4.5% per annum, a total of £4.6 billion, BofA added.