Should You Buy Compass Group Today?

LONDON -- Investor enthusiasm in food and support services specialist Compass Group (LSE: CPG  ) has been steadily gaining pace in recent months, pushing the firm's shares 14% higher during 2013 and to all-time highs of 845 pence last week.

And I expect the company to keep punching new share-price summits, as strength in North America and rising business levels in exciting developing markets underpin future growth.

Firm reports solid H1 trading statement
Compass announced in yesterday's bubbly trading update that despite ongoing weakness in Europe and Japan, organic growth is expected to have risen 5% during the first half of the current financial year.

Robust business in North America has helped to drive growth momentum, Compass noted, with organic revenue rising 8.5% during the period. Healthy new business inflows, excellent client-retention, and chunky like-for-like growth all boosted the top line, while a 10-basis-point improvement in operating margins sweetened the news.

And the company continues to rev up business in emerging markets, with organic sales rising 10% during the period. Compass noted particular strength in Australia, Brazil, and Turkey, although it also saw rapid growth in China, Russia, and India, which currently contribute a small portion of revenue.

Compass conducted M&A activity in the region of 80 million pounds in the September-to-March period, including the purchase of two health care firms in the U.S. and the acquisition of a food services company in Colombia and another in Canada. I expect further bolt-ons to supplement the company's already stellar growth story.

Earnings ready to accelerate higher
Compass has an enviable track record of punching steady earnings growth despite the ongoing macroeconomic travails of recent years. And forecasters expect the company to maintain this steady expansion over the medium term: Earnings per share are anticipated to increase 8% in the year ending September 2013 to 46 pence before marching 11% higher to 51 pence the following year.

The firm also has a decent track record of building dividends, with last year's 21.3 pence payout up more than 10% from 2011. And City brokers expect this to rise to 23.2 pence this year before rising to 25.8 pence in 2014, boasting excellent coverage right at the security mark of two times. Further, the firm has also earmarked 400 million pounds' worth of share buybacks, which should be completed by the end of fiscal year 2013. The company has already completed 93 million pounds of the program.

Compass currently changes hands on a P/E rating of 17.9 and 16.1, respectively, for 2013 and 2014. Although this does not appear cheap at first glance, I believe the pan-global group's heavy weighting toward North America, coupled with accelerating operations in new geographies, provides investors with excellent growth prospects.

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