Shares of Edenred (EPA:EDEN) and Sodexo (EPA:EXHO), two leading French meal-voucher issuers, fell on Monday following the announcement by Minister Olivia Gregoire suggesting a cap on the companies' commissions. The proposed cap is expected to be introduced before 2026, which led to a decrease in Edenred's shares to EUR52.78 and Sodexo's shares to EUR94.34.
Edenred, with its high earnings quality and free cash flow exceeding net income, has been a consistent performer in the market, as noted by InvestingPro Tips. The company has also shown a strong return over the last five years and has maintained dividend payments for 13 consecutive years, a signal of its financial stability. Yet, the company is trading at a high earnings multiple, which might be a concern for some investors.
On the other hand, Sodexo, a prominent player in the Hotels, Restaurants & Leisure industry, has been demonstrating consistently increasing earnings per share, according to InvestingPro Tips. The company has maintained dividend payments for 21 consecutive years, highlighting its commitment to returning value to shareholders. Sodexo operates with a moderate level of debt, which might be a factor to consider for risk-averse investors.
Gregoire has also ordered an antitrust review due to potential market malfunctioning, a topic she discussed on France Info radio. The minister's actions come amid concerns over the current commission rates, which stand between 3-5%.
Edenred defended their restaurant commissions as results of free competition. The company has not yet made any further comments regarding the proposed cap or the impending antitrust review.
Analysts at Bernstein have estimated that less than 8% of Edenred's and 3-4% of Sodexo's EBIT could be affected by the proposed changes. Sodexo did not comment when contacted by Dow Jones Newswires.
The potential impact of these changes on the financial performance of both companies will be closely watched by investors and industry experts alike in the coming months. According to InvestingPro's real-time metrics, the market cap of Edenred stands at 24.75M USD, with a P/E ratio of -2.66. The company has also shown strong revenue growth, with a 30.08% increase in the last twelve months up to Q2 2023.
For more insights and tips on these companies, investors can check out InvestingPro's detailed analysis on Edenred and Sodexo.
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