ARAMARK Holdings (ARMK) AI Stock Analysis

• Market Cap: $8.75B
• Dividend Yield: 1.21%
• Average Volume (3M): 2.25M
• Price to Earnings (P/E): 26.0
• Beta (1Y): 0.82
• Revenue Growth: -5.98%
• EPS Growth: -46.55%
• Country: US
• Employees: 266,680
• Sector: Industrials
• Sector Strength: 75
• Industry: Specialty Business Services
• EPS (TTM): 1.27
• Shares Outstanding: 265,104,860
• 10 Day Avg. Volume: 1,670,536
• 30 Day Avg. Volume: 2,245,639
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 1.79
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 11.02
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $43.67
• Price Target Upside: 32.13% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 7

ARMK's overall score of 64.8 reflects a balanced view of its strengths and challenges. The company shows strong cash flow management and optimistic earnings guidance, which are offset by high leverage and a relatively high valuation. Technical indicators and valuation metrics suggest caution, but recent positive earnings call sentiments provide a balanced outlook.

Positive Factors

New business wins

Annualized new business wins were at a record level for the company, indicating strong underlying momentum in the business.

Sales pipeline

Aramark's sales pipeline for new business is bigger now than it’s ever been, management asserts.

Shareholder returns

The company has started the process of returning capital to shareholders through a recent $500M share repurchase authorization and an 11% dividend raise.

Negative Factors

Net new business growth

ARMK did have weak net new business growth in FY24 due to lower retention driven by a couple of unique situations.

Organic growth

Organic growth came in notably below expectations, growing 4.7% in the quarter, below MSe of 6.6%.

Retention rates

Retention suffered from two lower margin facilities contract losses, pushing retention to 93.2%.

ARAMARK Holdings Business Overview & Revenue Model

Company Description

Aramark Holdings (ARMK) is a leading global provider of food, facilities, and uniform services to a wide range of clients across various sectors, including education, healthcare, business, and sports and leisure. The company is known for its comprehensive service solutions, offering everything from catering and dining services to facilities management and uniform rental and maintenance. Aramark operates in numerous countries, serving millions of people every day through its commitment to excellence and innovation.

How the Company Makes Money

Aramark makes money primarily through contracts with institutions and organizations seeking outsourced service solutions. The company's revenue streams include food services, which involve providing catering and dining management to schools, hospitals, and businesses; facilities services, which cover cleaning, maintenance, and other building management functions; and uniform services, which involve renting, cleaning, and maintaining uniforms for various industries. Key factors contributing to Aramark's earnings include long-term client relationships, strategic partnerships, and a diverse service offering that meets the needs of a broad client base. The company benefits from economies of scale and its ability to adapt its services to the specific requirements of different sectors.

ARAMARK Holdings Financial Statement Overview

Summary

ARMK demonstrates a mixed financial performance, with challenges in profitability and revenue growth. However, it shows improving cash flow management and a stable equity position. High leverage is a concern, but positive cash conversion ratios and improving net profit margins offer optimism for future performance.

Income Statement

ARMK shows a mixed performance in its income statement. The Gross Profit Margin for TTM is 7.11%, which is a decrease from the previous years, indicating a squeeze on profitability. The Net Profit Margin stands at 1.94% TTM, showing improvement from 1.51% in the previous annual report. Revenue has slightly increased by 0.83% TTM, but remains volatile, having decreased from the previous year. EBIT and EBITDA margins indicate operational efficiency at 4.33% and 7.00% respectively, with slight fluctuations over the periods.

Balance Sheet

The Balance Sheet reflects a stable equity position with Stockholders' Equity at $3.08 billion TTM. However, the Debt-to-Equity Ratio is high at 0.40, indicating significant leverage, though improved from the previous year. ROE is positive at 11.02% TTM, suggesting reasonable returns on equity despite fluctuations. The Equity Ratio is 25.45% TTM, showing moderate reliance on equity financing.

Cash Flow

The Cash Flow statement indicates positive Free Cash Flow growth, with a rate of 58.85% TTM. The Operating Cash Flow to Net Income Ratio is 2.34 TTM, reflecting strong cash conversion capabilities. The Free Cash Flow to Net Income Ratio is also healthy at 1.43 TTM, indicating efficient cash utilization. These metrics suggest solid cash flow management despite previous fluctuations.

Breakdown
Sep 2024	Sep 2023	Sep 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
17.40B	18.85B	16.33B	12.10B	12.83B
	Gross Profit
1.43B	1.82B	1.56B	1.09B	835.89M
	EBIT
706.51M	862.93M	628.37M	191.44M	-66.32M
	EBITDA
1.17B	1.53B	1.16B	580.74M	310.67M
	Net Income Common Stockholders
262.52M	674.11M	194.48M	-92.22M	-461.44M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
714.83M	2.07B	329.45M	532.59M	2.51B
	Total Assets
12.67B	16.87B	15.08B	14.38B	15.71B
	Total Debt
5.57B	8.63B	7.79B	7.83B	9.69B
	Net Debt
4.89B	6.66B	7.46B	7.30B	7.18B
	Total Liabilities
9.63B	13.15B	12.04B	11.64B	12.97B
	Stockholders Equity
3.04B	3.71B	3.03B	2.72B	2.74B
Cash Flow		Free Cash Flow
726.51M	305.02M	329.74M	281.74M	-187.75M
	Operating Cash Flow
726.51M	766.43M	694.50M	657.08M	176.68M
	Investing Cash Flow
-160.81M	208.91M	-831.29M	-634.39M	-361.12M
	Financing Cash Flow
-1.56B	653.65M	-37.69M	-2.01B	2.44B

ARAMARK Holdings Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 33.05
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ARMK, the sentiment is Positive. The current price of 33.05 is above the 20-day moving average (MA) of 32.73, below the 50-day MA of 34.40, and below the 200-day MA of 36.61, indicating a neutral trend. The MACD of -0.45 indicates Negative momentum. The RSI at 48.30 is Neutral, neither overbought nor oversold. The STOCH value of 72.02 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ARMK.

ARAMARK Holdings Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
UNF	79 Outperform	$3.19B	22.19	7.17%	0.76%	5.04%	31.69%
RTO	78 Outperform	$11.39B	29.38	7.44%	2.22%	3.96%	-17.48%
CTAS	76 Outperform	$84.10B	48.32	40.15%	0.72%	7.79%	19.09%
ABM	74 Outperform	$2.92B	37.03	4.46%	1.95%	2.81%	-67.57%
CBZ	73 Outperform	$3.60B	45.06	6.25%	―	32.27%	-40.50%
ARMK	65 Neutral	$8.75B	26.01	11.46%	1.21%	-5.98%	-46.55%
Sector *	63 Neutral	$4.29B	11.36	5.34%	214.53%	4.14%	-9.10%

ARAMARK Holdings Corporate Events

Aramark Holdings Announces Senior Notes Redemption Plan

On January 17, 2025, Aramark Services, Inc., an indirect wholly owned subsidiary of Aramark, announced its decision to redeem the entire $551,538,000 principal amount of its 5.000% Senior Notes due 2025. The redemption, conditioned upon securing new indebtedness, will occur on February 18, 2025, at a price equal to the full principal amount plus accrued interest. In tandem with this redemption, Aramark has successfully syndicated new U.S. dollar denominated term loans amounting to $1,395 million, due June 2030. The proceeds from these loans are expected to be used for the redemption, refinancing existing loans, and covering related expenses, while maintaining a net leverage neutral position for the company.