sodexo stock analysis

Sodexo stock analysis – put this good growth business on your watch list

Sodexo stock analysis is part of a series of analyses I made on growth stocks that compound over time. The best stock out of the list to invest in was Visa. You can check my Visa stock article and also the tool best used to analyze the risk and reward when it comes to growth stocks, the delta of the delta.

Sodexo stock analysis

Sodexo stock, represents a very interesting company providing a wide range of services; everything from food and reception through to cleaning, energy management, grounds maintenance, building maintenance and security. What is does is to provide food and other things to bigger companies and institutions like the University of London and Japanese Olympics.

Sodexo stock business model and clients

Sodexo stock analysis
Sodexo stock analysis

Source: Sodexo investor relations

When it comes to these businesses, it is all about scale and bigger players usually consolidate through mergers and acquisitions. Like we have seen when analysing the FTSE 30 Index and the Compass Group, there is a lot of room for growth in the market and consolidation.

Sodexo stock and business market opportunity going forward

sodexo stock business growth
sodexo stock business growth

Source: Compass Group

Further, by looking ad Sodexo’s financials, there is nothing bad there. Even long-term debt is relatively low.

Sodexo stock financials

Sodexo stock financials
Sodexo stock financials

Source: Sodexo Stock Quote Morningstar

Revenue has been growing, earnings and dividends too, the number of shares has been going down while free cash flows have been pretty strong and stable.

Their projected growth is around 5%, there operating margins look stable and the sectors seems to be in a positive tailwind as more and more companies outsource their food management and other things. The return on capital employed is high which shows that the management is doing good things when it comes to capital allocation.

Sodexo’s return on capital employed

Sodexo’s return on capital employed
Sodexo’s return on capital employed

Source: Sodexo investor relations

However, the price to earnings ratio is at 23, which means the earnings return is below 5% and if we add an average 4% growth (including recessions), we get to a 9% return. For a 15% return we would need a price of 50 and 5% growth, something very unlikely given the looks of the business but you never know.

Sodexo stock price chart
Sodexo stock price chart

Sodexo stock price Source: Markets BI

Sodexo stock analysis conclusion

Sodexo stock is a nice one to put on your watch list. It is a good business offering healthy growth and probably returns between 5 and 10% long-term.

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