At EUR 48 and 10x P/E, Sodexo is priced for permanent structural impairment — a scenario requiring margins to fall to COVID-era lows and stay there. This is inconsistent with the company's sticky revenue base (94% retention), structural cash generation, and the secular outsourcing tailwind.
The market prices in zero probability of the new CEO succeeding, zero benefit from efficiency investments, and no value for the Rest of World segment growing at 10%+. A reverse DCF shows the implied perpetuity UOP margin is 3.2% — a level not seen since FY2021.
Risk-reward is asymmetric: downside to EUR 42 (-12%) if everything goes wrong; upside to EUR 70+ (+46%) if Sodexo merely reverts to sector-median multiples. The 5.7% dividend yield compensates for waiting.
| Risk | Probability | Impact | Mitigation |
|---|---|---|---|
| NA continues to deteriorate | 25% | -10-20% | CEO took direct NA control; new contracts ramping |
| Margin stagnation | 20% | -15-25% | GBS, procurement gains provide floor at 4.5% |
| CEO strategy disappoints | 25% | -5-15% | Low bar already set; "transition year" priced in |
| Labor cost spike | 15% | -10-15% | Contractual CPI escalators; Entegra GPO |
| Dividend cut | 10% | -20-30% | 50% payout ratio gives 50% buffer |
| Method | Bear | Base | Bull | Weight |
|---|---|---|---|---|
| DCF (10-year) | EUR 52 | EUR 56 | EUR 83 | 30% |
| Peer Comps | EUR 45 | EUR 55 | EUR 68 | 20% |
| Historical Multiples | EUR 53 | EUR 66 | EUR 80 | 15% |
| Sum-of-Parts | EUR 50 | EUR 60 | EUR 75 | 10% |
| Scenario Blend | EUR 42 | EUR 56 | EUR 74 | 25% |
| Blended Target | EUR 42 | EUR 56 | EUR 74 | 100% |