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Investing.com -- Shares of Compass Group (LSE:LON:CPG) fell by 6% following a double downgrade by BNP Paribas (OTC:BNPQY) Exane from outperform to underperform.
The investment firm expressed concerns over the contract catering company’s future performance, particularly in the US Healthcare sector, where proprietary data suggests a decline in industry-wide client retention.
BNP Paribas Exane’s reassessment comes amid signs that Compass may face challenges in maintaining its client base, a critical aspect of the firm’s revenue stability. The analysis points to a potential 10% price-to-earnings (P/E) derating due to precedents of soft retention impacting the industry.
The firm’s cautious stance on Compass contrasts with its current view on Aramark, which remains rated at outperform, while it has reiterated the underperform rating for Sodexo (EPA:EXHO), indicating a varied outlook for companies within the sector.
Despite recent share price weakness in Compass, which some investors might interpret as an opportunity to buy, BNP Paribas Exane advises otherwise. The firm has set a price target (PT) for Compass at 2,500 pence, suggesting a further 4.8% decrease from the last closing price.
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