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Stock of the week: G4S

Written by:
Graham Spooner, investment research analyst at The Share Centre, picks security services company G4S as stock of the week.

G4S is the world’s leading security solutions group, which specialises in outsourcing business processes in sectors where security and safety risks are considered a strategic threat. What some may not know is that G4S is the largest employer quoted on the London Stock Exchange and has operations in over 110 countries.

We are recommending the group as our stock tip of the week as we think the shares are attractive at present as they have fallen off since their summer highs, potentially providing investors with a better entry point. Moreover, despite concerns over the sector, there have been two analyst upgrades already this year, which implies an underlying confidence in the sector.

In an unsettled world, demand for security work is unlikely to fall significantly and there has been improvement in emerging markets. Management are implementing a transformation program and addressing the financial situation of the company in order to cut costs, debt and improve efficiency.

Interested investors should appreciate that already, as a result of this, there has been an improvement in profit margins, productivity programs and demand for its automated cash handling business.

The ongoing strategic review will keep management busy for some time yet and it hopes the end result will be that faith is restored in the group. We therefore continue to recommend G4S as a ‘buy’ for medium risk investors and hope that there could be more recovery to come over the longer-term.

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