Barclays makes long-term call on Compass, upgrades to ‘overweight’

The bank said Compass is well positioned to flex costs/contracts sufficiently to recover margins even if volumes remain permanently impaired; gain more share from smaller/weaker competitors; benefit from more first-time outsourcing in healthcare/education; and adapt the business to a digital/delivery model where relevant.

"Our price target is raised to 1,500p, reflecting forecast upgrades and a new valuation approach of 11.6x 2022e EV/EBITDA, which reflects both our enhanced confidence as well as a discount to prior levels for the structural challenges."

Barclays said this is a long-term call.

"Short term, the stock performance will likely be dominated by virus/vaccine/lockdown newsflow and we can’t predict how that will look, but we do feel better about Compass’ ability (more than its peers) to get back to its prior peak and again be a compounder."