Compass Group PLC (LON: CPG), the world’s largest contract caterer, heads into December 2025 with fresh full-year numbers, upbeat guidance for 2026 – and a new wave of analyst upgrades that contrast with a share price that has lagged the wider market.
As of 1 December 2025, Compass Group shares trade around 2,350–2,400 pence in London, near the bottom of their 52-week range of roughly 2,333p–2,853p. [1] Despite solid operational performance, the stock is down more than 10% year-to-date and has underperformed the FTSE 100 by about 30%, according to RBC and recent market coverage. [2]
Yet Wall Street and City analysts are, if anything, getting more optimistic.
Full-Year 2025 Results: Double-Digit Profit Growth and Strong Cash Flow
Compass reported results for the year ended 30 September 2025 on 25 November, delivering another year of strong growth and margin progress. [3]
Key FY25 highlights (underlying, constant currency):
- Revenue: $46.1 billion, up 8.7% organically
- Underlying operating profit: $3.335 billion, up 11.7%
- Underlying operating margin:7.2%, up 10 bps year on year
- Underlying EPS: up 11.1%
- Underlying free cash flow: $1.975 billion, up 13.5%
- Annual dividend per share: up 10.2% to 65.9 cents
Operationally, the growth engine remains North America:
- Organic revenue up 9.1% in North America and 7.7% in International
- Net new business growth of 4.5%, within the group’s 4–5% structural target
- Client retention above 96% and around $3.8bn of new business wins over the year [4]
According to Reuters, Compass beat consensus forecasts with underlying operating profit of $3.34 billion and revenue of $46.1 billion, versus analyst expectations of $3.31 billion and $45.4 billion respectively. [5]
The combination of mid- to high-single-digit organic growth, modest margin expansion and strong cash conversion is exactly what many investors look for in a “compounding” business – which helps explain why analyst sentiment has turned increasingly positive, even as the share price has stumbled.
Strategy and M&A: Vermaat Deal Extends European Footprint
Compass has continued to lean on bolt-on mergers and acquisitions to deepen its presence in attractive niches.
In its Q3 2025 trading update, the group reported: [6]
- 8.6% organic revenue growth in Q3 and 8.5% year-to-date
- Net new business growth in the middle of the 4–5% target range
- Over 96% client retention
- $1.1 billion net M&A spend year-to-date
The marquee move was an agreement to acquire Vermaat Groep B.V., a leading premium foodservice player in Europe, for about €1.5 billion. Management frames Vermaat as a way to expand higher-end on-site concepts and retail-style food offerings across European markets, complementing Compass’s existing scale. [7]
In the full-year statement, Compass highlighted that M&A and capex are central to its growth algorithm:
- Around $1.5bn invested in capex (3.3% of revenue)
- Around $1.3bn in M&A, with integrations “ahead of schedule”
- An estimated total addressable market (TAM) of c.$360bn, which the company is expanding as it adds new capabilities [8]
That TAM figure lines up with RBC’s estimate and their view that Compass has less than 15% share of its market, leaving a long runway as more food and support services are outsourced. [9]
2026 Guidance: Slower Revenue, Still Double-Digit Profit Growth
Management’s guidance for the 2026 financial year is deliberately conservative – and that is one reason the shares fell on results day.
For FY26, Compass expects: [10]
- Underlying operating profit growth around 10%
- Organic revenue growth around 7%, versus 8.7% in 2025
- Around 2% additional profit growth from M&A (including Vermaat)
- Continued margin progression
Over the long term, Compass reiterates its “growth algorithm”:
- Mid- to high-single-digit organic revenue growth
- Ongoing margin expansion
- Profit growth ahead of revenue growth
The main reason revenue growth is expected to slow is lower inflation. The company benefited significantly from pricing in recent years; as inflation decelerates, management expects to pass some of the benefit back to clients, mechanically reducing the revenue growth rate. [11]
In a post-earnings call cited by Reuters, CFO Petros Parras acknowledged that inflation is easing faster than previously assumed, which pushes Compass to give more conservative top-line guidance even as volumes and new business remain healthy. [12]
That nuance matters: the story is less about demand softening and more about pricing normalising.
Latest Analyst Sentiment: Upgrades and Higher Price Targets
RBC turns bullish on 1 December 2025
On 1 December 2025, RBC Capital Markets upgraded Compass Group from “sector perform” to “outperform”, raising its target price from 2,700p to 2,775p. [13]
RBC’s thesis, summarised:
- The share price pullback has created a more attractive entry point in a “high-quality compounder”.
- The stock has underperformed the FTSE 100 by around 30% year-to-date, despite solid fundamentals.
- Forward 12-month P/E has fallen back to roughly 21.5x, close to Compass’s adjusted 10-year average, putting the stock in “growth at a reasonable price” territory for FY26.
- RBC models revenue rising from about $46.1bn in FY25 to $50.3bn in FY26 and $54.0bn in FY27, with margins grinding higher. [14]
Crucially, RBC directly addresses three thematic worries that have been hanging over Compass:
- Macro and consumer spending: The bank notes that on-site participation rates are rising and that Business & Industry – essentially office and corporate feeding – is currently the fastest-growing vertical. [15]
- Artificial intelligence (AI): Rather than a threat, AI data-centre campuses and tech customers are framed as a net positive in the near term, helping Compass win new contracts. [16]
- GLP-1 weight-loss drugs: RBC argues that fears of structurally lower food volumes are overstated once you factor in pricing power and menu mix adjustments. [17]
Citigroup, Goldman Sachs and others join the bull camp
RBC’s move follows a flurry of positive calls in late November:
- Citigroup upgraded the U.S. OTC ADR CMPGY to “strong buy” on 30 November, noting recent upgrades from other brokers and a one-year trading range of $29.88–$36.70. [18]
- MarketBeat shows Compass with an average “Moderate Buy” rating on the London line, based on six analysts (5 Buy, 1 Hold) and an average 12-month price target of 2,920p, implying about 25% upside from c. 2,343p. [19]
- Investing.com aggregates a broader sample of 19 analysts, with a consensus “Buy” rating and an average target of around 2,841p (roughly 21% upside), within a range of ~2,193p–3,232p. [20]
On the U.S. side, ADR-focused services such as Barron’s and Zacks list average targets around $38–$40 for CMPGY, versus a last close in the low $30s, again pointing to mid-20s percentage upside potential. [21]
Put simply: across both sides of the Atlantic, the analyst community largely agrees that Compass is a buy with meaningful upside, even if the near-term growth rate moderates.
Valuation: Quality at a Price
Valuation is where the debate gets interesting.
Based on recent market data:
- London-listed CPG trades around 2,350–2,400p, close to its 52-week low. [22]
- RBC cites a forward P/E of c. 21.5x FY26 earnings, roughly in line with the 10-year average. [23]
- MarketBeat’s longer-term snapshot suggests a trailing P/E in the low 30s, reflecting strong recent earnings but also a historically premium rating. [24]
That leaves Compass comfortably more expensive than the broader UK market, but broadly in line with other global “compounder” staples and business-service companies.
Pros highlighted by MarketBeat’s bull-case summary include: [25]
- A market cap around £40 billion, signalling scale and resilience.
- Consistent revenue growth and strong cash generation.
- Recent analyst upgrades and rising price targets.
On the flip side, their bear-case points emphasise:
- A rich earnings multiple, which leaves less room for disappointment.
- A relatively elevated debt-to-equity ratio and sub-1x current ratio, which investors may view cautiously in a downturn. [26]
Investors need to decide whether Compass’s structural advantages and long runway justify paying up for the stock, or whether they would rather wait for a deeper pullback.
Business Drivers: Where Growth Is Coming From
The core of the Compass story hasn’t changed much – and that’s exactly the point.
Structural outsourcing trend
Compass continues to benefit from the long-term shift from in-house catering to outsourced solutions in workplaces, hospitals, universities and remote sites. Management estimates that first-time outsourcing accounts for around 45% of gross new business wins, and RBC believes this engine still has years to run. [27]
North America still in the spotlight
North America accounts for roughly 80% of group EBIT and remains the key growth driver: [28]
- FY25 organic revenue growth of 9.1% in North America
- Strong demand for office catering and workplace dining, including contracts at flagship corporate campuses
- Broad-based growth across sectors (Business & Industry, Education, Healthcare & Seniors, Sports & Leisure, and Defence/Remote)
Pricing normalisation vs. volume growth
With inflation fading, Compass will no longer get the same revenue “lift” from price increases. But that is partly offset by:
- Improving volume growth as more employees return to offices
- Ongoing shift to outsourcing, especially in mid-market and smaller customers
- Mix shift toward higher-value concepts and premium offerings such as those provided by Vermaat
The net result is a company still guiding to high-single-digit organic growth over time, but with less headline inflation noise and more emphasis on volumes and mix.
Risks: What Could Go Wrong?
Even bullish analysts acknowledge several key risks:
- Execution and integration risk
Large M&A programmes can go awry. Compass is absorbing Vermaat and other deals, and while management cites integration “ahead of expectations”, any misstep could weigh on margins. [29] - Leverage and liquidity
MarketBeat flags a relatively high debt-to-equity ratio and a current ratio below 1x, suggesting that Compass doesn’t carry a large liquidity buffer. [30] While this is common in stable cash-generative businesses, it becomes a risk if a severe downturn or acquisition misstep hits cash flows. - Economic and employment cycles
A material slowdown in white-collar employment or office attendance would hurt its Business & Industry segment, which accounts for close to 40% of sales. [31] - Technological and behavioural shifts
- AI could, in the very long term, alter office work patterns again – although RBC currently sees AI-related clients as a growth driver rather than a threat. [32]
- GLP-1 weight-loss drugs could, in theory, dampen food volumes, though analysts argue this is likely to be mitigated by pricing and menu adaptation. [33]
- Competition
Rivals like Aramark and Sodexo are also chasing outsourcing opportunities. Reuters notes that Aramark has given an upbeat 2026 outlook despite a recent revenue miss, while Sodexo has flagged slower growth due to contract losses and competitive pressures in the U.S. [34]
Competitive intensity is unlikely to vanish, even if Compass currently looks better positioned than some peers.
Is Compass Group PLC Stock a Buy Now?
For investors looking at Compass Group on 1 December 2025, the investment case can be summarised in three broad points:
- Fundamentals remain strong
- Double-digit profit growth in FY25
- Healthy cash generation and a growing dividend
- A clear 2026 plan for further profit growth and margin expansion [35]
- Sentiment is turning more positive
- Multiple upgrades in November, culminating in RBC’s move to “outperform” and a higher target on 1 December
- Consensus “Buy/Moderate Buy” ratings with mid-teens to mid-20s percentage upside to average price targets [36]
- Valuation is no longer excessive, but still not cheap
- The stock trades near the low end of its 12-month range and at a discount to recent highs
- On the other hand, it still commands a premium multiple versus the wider UK market and carries balance-sheet and macro risks
For long-term investors comfortable with the contract catering space, Compass increasingly resembles a “quality compounder on sale” rather than a growth story that’s run its course. For more valuation-sensitive or risk-averse investors, waiting for either a deeper market correction or additional evidence that FY26 guidance is conservative rather than heroic may be the smarter move.
Either way, Compass Group PLC has clearly re-entered the conversation in late 2025 as one of the FTSE 100’s more interesting mis-priced quality stories, rather than just a sleepy catering stock.
References
1. www.investing.com, 2. www.reuters.com, 3. www.compass-group.com, 4. www.compass-group.com, 5. www.reuters.com, 6. www.compass-group.com, 7. www.compass-group.com, 8. www.compass-group.com, 9. www.investing.com, 10. www.compass-group.com, 11. www.reuters.com, 12. www.reuters.com, 13. www.investing.com, 14. www.investing.com, 15. www.investing.com, 16. www.investing.com, 17. www.investing.com, 18. www.marketbeat.com, 19. www.marketbeat.com, 20. www.investing.com, 21. www.barrons.com, 22. www.investing.com, 23. www.investing.com, 24. www.marketbeat.com, 25. www.marketbeat.com, 26. www.marketbeat.com, 27. www.investing.com, 28. www.investing.com, 29. www.compass-group.com, 30. www.marketbeat.com, 31. www.investing.com, 32. www.investing.com, 33. www.investing.com, 34. www.reuters.com, 35. www.compass-group.com, 36. www.investing.com
