The FTSE 100 has had no shortage of success stories. Rolls-Royce, Barclays, and Fresnillo are just some examples of UK shares that have surged to new highs and grabbed the headlines in the process.
But looking ahead, many of these big winners are losing momentum. And for investors hunting fresh opportunities, a far less glamorous name may now offer considerably more upside.
In fact, one analyst believes it could outpace Rolls-Royce by more than three times.
A catering giant hiding in plain sight
Compass Group (LSE:CPG), which unusually trades in US dollars despite being listed in the UK, is the world’s largest contract food services company. It provides catering and support services to hospitals, offices, schools, sports venues, and military facilities across more than 30 countries.
Admittedly, food catering doesn’t sound very glamorous, especially compared to aerospace, banking, and mining giants. And yet, one institutional analyst has placed a 12-month price target of $56.33 on the shares, against a current price of around $33.
This implies potential upside of 70.6% by this time next year. For reference, the most optimistic outlook for Rolls-Royce shares is only a 22.8% boost. And if these projections are accurate, that could be the difference between turning a £1,000 initial investment into £1,228 or £1,706.
So let’s dig a little deeper and look at what’s driving all the positivity.
Is a 70%+ gain realistic?
The first half of Compass’ 2026 fiscal year delivered a genuinely compelling set of numbers. Revenue rose 9% to $25.0bn, underlying operating profit climbed 12% to $1,839m, and underlying earnings per share grew 12% to 72.8 cents. Meanwhile, free cash flow came in at $825m, up 11%, and the interim dividend was raised 13% to 25.5 cents per share.
Subsequently, management decided to raise its full-year guidance for underlying operating profits from a 10% growth rate to an 11%+.
What does that mean for the share price moving forward? The structural opportunity underpinning all of this performance is vast.
The global food services market currently stands at around $360bn. Compass holds less than 15% of that, and management estimates the addressable market could reach $600bn by 2035. And if the firm’s able to continue stealing market share at its current pace, then a gigantic 70% gain might not be as outrageous as it first appears.
However, that doesn’t make this a guaranteed winner. The most visible short-term hurdle is the balance sheet.
Net debt jumped to $8.6bn at the end of March, pushed higher by $2.3bn of acquisition spending in the period, including the $1.7bn Vermaat acquisition in the Netherlands. Subsequently, the group’s net-debt-to-EBITDA ratio is now ahead of management’s 1-1.5 target range at 1.7 times.
To be fair, the company expects leverage to drop again in the second half as future cash generation starts to offset the impact of acquisitive spending. However, if Vermaat fails to live up to performance expectations, this could prove to be a slow process.
What’s the verdict?
Compass Group isn’t a stock that excites at dinner parties. But behind its unglamorous surface lies a seemingly consistent, cash-generative, and structurally well-positioned business in the FTSE 100.
With a growing opportunity in the catering outsourcing market and a fresh guidance upgrade in hand, this quiet compounder might indeed be worth a closer look.
Should you invest £5,000 in Compass Group Plc right now?
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Zaven Boyrazian does not hold any positions in the companies mentioned.
