SSP Group plc (LON: SSPG), a key player in the Consumer Cyclical sector and the restaurant industry, stands at a fascinating juncture for investors looking to capitalise on the post-pandemic resurgence in travel and dining out. With a market capitalisation of $1.27 billion, this London-headquartered company operates an extensive portfolio of food and beverage outlets across numerous international travel and leisure hubs, including airports, railway stations, and shopping centres.
Currently trading at 157 GBp, SSP Group’s stock has shown resilience with a modest price change of 0.01% recently. Within the past year, the stock has fluctuated between 135.00 GBp and 191.50 GBp, indicating a degree of volatility but also potential for growth. Investors might take particular interest in the stock’s current positioning below both its 50-day and 200-day moving averages, at 164.73 GBp and 166.37 GBp respectively, suggesting potential upside if the stock rebounds above these levels.
Despite the absence of certain key valuation metrics, such as a trailing P/E ratio, the forward P/E stands at an eyebrow-raising 1,179.92. This figure reflects significant expectations for future earnings growth, possibly driven by the company’s strategic expansion and recovery in global travel. SSP Group’s revenue has grown by 9.50%, and while the company posts a negative EPS of -0.03, it maintains a robust return on equity of 13.55%, showcasing effective use of shareholder funds.
Free cash flow for SSP Group is strong, at £175.25 million, providing a buffer to fund further expansion or to weather economic turbulence. However, investors should be mindful of the company’s dividend yield of 2.39%, which, coupled with a payout ratio of 108.82%, implies the dividend is being funded from beyond just current earnings. This scenario could be a red flag unless earnings growth catches up to support the payout.
Analyst sentiment toward SSP Group is cautiously optimistic. With seven buy ratings, three holds, and three sells, the consensus reflects confidence amidst some reservations. The target price range of 160.00 to 330.00 GBp, with an average target of 230.00 GBp, suggests a substantial potential upside of 46.50% from current levels, enticing for those with a risk appetite for cyclical recovery plays.
Technically, the stock’s RSI (14) at 45.85 points to a neutral momentum, and the MACD and signal line both trending below zero suggest a bearish sentiment which investors might view as an opportunity for entry before a potential market correction.
Founded in 1961, SSP Group’s long-standing presence in the industry is backed by a global footprint that spans North America, Europe, and beyond. The company’s diversified presence across airports, railway stations, and diverse outlet types, including cafes and restaurants, positions it favourably to capture the upswing in global mobility trends.
For investors, SSP Group plc represents a compelling case of a cyclical recovery play, balancing the potential for significant gains with inherent risks tied to economic cycles and company-specific factors. As the world continues to emerge from the shadows of the pandemic, SSP Group’s strategic positioning in travel and food services offers a unique opportunity for those willing to navigate the complexities of the consumer cyclical sector.
