Compass Group PLC (LON:CPG) has fallen almost 15% since its early October peak, and Citi thinks now would be a good time to buy.
The contract caterer took another biffing yesterday after it served up slightly lukewarm full-year results, and Citi notes that it is now trading close to its long-term average price/earnings (PE) ratio of 17.4, having derated since the Brexit vote by a couple of points to a PE of 18.4 times projected earnings for the current year.
“Rising bond yields have in part driven this sell-off from quality growth names but it also reflects only in-line [fiscal 2016] results from contract catering peers and some shorter-term weakness, especially in extraction [i.e. mining, oil & gas] industry-related business,” in Citi’s view.
The broker likes the robust free cash flow yield of 4.5% and the strong growth outlook, not to mention its near 60% exposure to US dollar revenues.