RBC Capital downgrades Compass to ‘sector perform’

"We continue to like CPG as a good all-weather stock with structural growth characteristics and a demonstrably defensive earnings profile," it said. "However, as shares are now trading ahead of both our unchanged PT and their 10-year adjusted price-to-earnings average, we see a slower burn from here and lower our rating."

RBC said that having risen 15% year-to-date, well ahead of the local FTSE 100 index and towards the high end of the Pan-Euro Business Services sector in total shareholder return terms, Compass now trades broadly in line with the price target.

"The calendarised P/E multiple of circa 26x for CY24 and circa 23x for CY25 puts it comfortably ahead of its 10-year 12-month rolling forward average P/E (ex lockdown-blighted 2020/21) of just under 21x," it said.

"We believe our (unchanged) DCF-derived PT of 2,400p gives CPG the benefit of the doubt for class-leading organic growth and margins, plus more generous medium-term and terminal growth assumptions. Pushing the PT higher at this point would, we think, be a contrivance."

RBC said the investment case is well understood and relative performance from here is more a call on the macro situation.

"Despite its huge scale, CPG is a relatively straightforward business to understand, with tried and tested management and performance (‘MAP’) processes driving dependable growth, and consequently a very sizeable investor fan club," it said.

"As the macro backdrop is, in our view, little clearer than it was at the start of the year, further outperformance on a 12-month view is arguably now more dependent on the market’s perception of CPG as something of a safe haven - less compelling, even if proved correct."