City backs this FTSE 100 defensive share trading at a discount
It’s lost almost a quarter of its value since early last year, but analysts like this ‘defensive call’ that is underappreciated by investors. Graeme Evans explains why.
9th April 2026 12:30
by Graeme Evans from interactive investor
Defensively-focused investors today had little appetite for the compounding returns of Compass Group (LSE:CPG) as the catering giant endured another poor session near the foot of the FTSE 100 index.
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The group, which boasts a near 15% share of the $360 billion (£268 billion) global food services market, retreated alongside a large number of ex-dividend stocks that included Standard Life (LSE:SDLF), Lloyds Banking Group (LSE:LLOY) and Reckitt Benckiser Group (LSE:RKT).
Higher oil prices amid uncertainty over the strength of this week’s Iran ceasefire meant the FTSE 100 index faded after Wednesday’s 2.5% rebound. Gains for stocks including National Grid (LSE:NG.), Vodafone Group (LSE:VOD) and Severn Trent (LSE:SVT) highlighted the defensive-nature of today’s dealings.
Compass has lost about a fifth of its value since the start of 2025 and 5% following the Iran war, even though it has minimal Middle East exposure and outperformed in the financial crisis.
Source: TradingView. Past performance is not a guide to future performance.
It boasts the support of two leading City banks after they published Buy notes this month, with Bank of America describing Compass as its defensive call in a “bearish scenario of a prolonged war and/or heightened global inflation”.
The bank said around half of the portfolio is in countercyclical sectors like education, healthcare and senior living, with the most cyclical segment of sports and leisure only 14% of revenues.
It pointed out that Compass is well placed to mitigate or pass through higher input costs, including through menu changes and food procurement scaling.
Counterparts at Berenberg believe the market underappreciates key elements of the investment case and that the narrowing of its historic multiple premium versus peers is unjustified.
Compass trades on 19.2 times one-year forward earnings, which represents a 16% discount to its 10-year history.
Berenberg highlighted a price target of $42, compared with Bank of America’s $40 and today’s level of $28.45. The shares recently changed their trading currency from sterling to dollars.
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A range of factors have driven the recent de-rating, including a weaker US labour market and wider rotation away from European quality compounders. Weight-loss drugs and potential for AI job displacement among Compass clients has also been mentioned.
The shares have fallen despite the company’s continued strong operational performance in 2025 after Compass grew its top line faster than smaller rivals Aramark (NYSE:ARMK) and Sodexo (EURONEXT:SW).
For 2026, it is guiding towards operating profit growth of about 10% on organic revenues 7% higher. Longer term, Compass said it remains confident in sustaining mid-to-high single-digit organic revenue growth, ongoing margin progression and profit growth ahead of sales growth.
Berenberg added: “While Compass is not recession-proof, history shows that the business is highly resilient in periods of macro uncertainty and it rebounds quickly in the event of material shocks.”
It said there was no evidence that Compass’s business model has been negatively disrupted by the emergence of AI. “If there is disruption, Compass only holds a 14% market share in the business and industry sector, which we think could provide opportunity for share gains.”
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The company has a dividend policy of paying out 50% of underlying earnings, which resulted in a 10.2% increase in the 2024/25 figure to 65.9 US cents per share. Total shareholder returns in the decade to 2025 stood at 197%.
In its annual report, Compass said its total addressable market continues to expand as additional capabilities enable the company to serve new sub-sectors.
It added: “This provides a significant runway for growth, with nearly three-quarters of the market still self-operated or held by regional players.”
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