ABM INDUSTRIES INCORPORATED (ABM): what the price requires

The current priced-in claim for ABM INDUSTRIES INCORPORATED (ABM) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-13 · Source: https://boothcheck.com/report/ABM

Headline

FieldValue
TickerABM
CompanyABM INDUSTRIES INCORPORATED
Current price$45.17/sh
CompositionBusiness & Industry 47% / Manufacturing & Distribution 19% / Aviation 13% / Education 11% / Technical Solutions 11%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed2.3%
Operating margin today3.7%
Margin compression implied-1.4pp
Multiple paid14x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage (computed at the 7% minimum rate; the CAPM rate 7% sits below it).

Reconcile: at the x-ray's 9.3% required return this reads ~4.7%/yr; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.51σ
cohort percentile (of 225 peers)14
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.57x5expensive
Earnings1.54x5expensive
Relative1.02x5expensive
Growth0.87x4justifies

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 5.8%); the inversion above states its own rate.

Per-Model Detail (n=19)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
DCF Exit MultipleGrowth$72.480.62xyesExit EV/EBITDA: 11.4x / 13.4x / 15.4x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$44.301.02xyesP/E 18x (sector median), scenarios: 15.0x / 18.0x / 21.0x (bear / base = sector held flat / bull), EV/EBITDA 12x
Simple DDMGrowth$675.910.07xyesDPS $1.14, g=9.1% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3%
Two-Stage DDMGrowth$40.561.11xyesStage 1: 20% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$28.991.56xyesBV/sh $29.58, ROE (TTM) 9.1%, ke 9.3%
Two-Stage Excess ReturnAsset$28.711.57xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$34.931.29xyesRev $9.1B, growth 7% (input: historical growth; tapered), Terminal P/S: 0.2x / 0.3x / 0.3x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$31.201.45xyesEPS $2.60, growth 2% (input: historical EPS growth), PEG=8.42 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$31.281.44xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.30B × (1−28%) / WACC 5.8% → EPV (no growth)
Residual IncomeAsset$28.661.58xyesBV $29.58 + 5yr PV of (ROE (TTM) 9.1% − Kₑ 9.3%) × BV; BV grows 5.9%/yr
Graham NumberAsset$41.601.09xyes√(22.5 × EPS $2.60 × BVPS $29.58) — Graham's conservative floor
EV/EBITDA RelativeRelative$37.121.22xyesEBITDA $0.34B × sector EV/EBITDA 12.0x
FCF YieldEarnings$29.361.54xyesFCF $334.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$22.781.98xyesSBC-adj FCF $0.30B (FCF $0.33B − SBC $0.04B) capitalized at Kₑ
Ben Graham FormulaEarnings$83.890.54xyesEPS $2.60 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$8.895.08xyesBV $29.58 × (ROIC 1.7% / WACC 5.8%)
P/Sales SectorRelative$382.940.12xyesRevenue $9.05B × sector P/S 2.5x
PEG Fair ValueRelative$97.500.46xyesEPS $2.60 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$28.111.61xyesEPS $2.60 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$1.8b
Net debt / NOPAT (after-tax)7.55x
Net debt / operating income (pre-tax)5.45x
Interest coverage3.2x
Share count CAGR (buyback)-3.3%
Burning cashno

Bullet Takeaways

Bull Case

Begin with the bear's strongest point, because it frames everything: ABM is a low-margin labor business with real leverage. Net margins sit below 2%, return on equity is around 9%, barely above its cost of equity, and net debt of about $1.78 billion is roughly 5.7 times operating income. On those facts alone you would expect a cheap, unexciting stock. But the data underneath undermines the simple read, because one segment is changing what the company is. Technical Solutions grew revenue 27% in the second quarter of fiscal 2026, with 22% organic growth, on robust demand in data-center markets, battery energy storage, and HVAC project activity. A facility-services roll-up is quietly becoming a play on the build-out of AI infrastructure and grid resilience.

That shift matters because it changes the growth and margin trajectory of the whole company. ABM sits at the intersection of energy resiliency, electrification, and AI-driven data-center construction, exactly where infrastructure spending is accelerating at a double-digit pace. A recent microgrid win with a major big-box retailer, alongside a stack of energy-storage and infrastructure projects booked in the quarter, is the kind of proof point that supports management's view of a multiyear growth cycle in the segment. First-half new-sales bookings reached a record $1.2 billion, and organic revenue across the company grew 6.1%, which is brisk for a business historically thought of as janitorial and parking contracts.

The base business provides the stability that lets the growth segment compound. ABM's core facility-services contracts are recurring, sticky, and structured to pass through labor costs, billed on hourly or fixed arrangements that recognize revenue as services are performed (FY2025 10-K, accession 0000771497-25-000031). That gives a predictable cash base across business, manufacturing, aviation, and education end-markets, and it funds the higher-growth Technical Solutions work. Management is shrinking the share count about 3.3% a year, pays a steady dividend, and pointed to margin and free-cash-flow improvement in the second half. The bull case is that the market still prices ABM as a sleepy contractor while the Technical Solutions engine re-rates it toward an infrastructure-services growth story, with a stable recurring base underneath and a valuation that has not caught up.

Bear Case

The structural problem is the combination of thin margins and real leverage, which leaves little room when anything goes wrong. ABM earns a net margin under 2%, which means a small adverse move in labor costs, contract pricing, or utilization can swing profitability sharply. Sitting on top of that thin margin is net debt of about $1.78 billion, roughly 5.7 times operating income, with interest coverage near 3 times. That is a meaningful debt load for a low-margin business, and it amplifies any operational stumble. A facility-services company is fundamentally a labor arbitrage: it bills clients for labor at a small markup, so wage inflation, tight labor markets, and the inability to fully pass through cost increases on fixed-price contracts are persistent threats to the already-slim spread.

The returns reflect how hard it is to create value in this model. Return on equity is about 9.1% against a cost of equity around 9.3%, meaning the business is earning roughly its cost of capital and no more, and the asset-based methods reflect that: the excess-return and residual-income methods land near $29, below the $44 price (June 27, 2026), and the ROIC-justified book value lands far lower because return on invested capital is only about 1.7%. When a business earns close to its cost of capital, it is not compounding shareholder value organically, it is treading water, and a leveraged company treading water is one downturn away from a coverage problem.

The Technical Solutions excitement, real as it is, carries its own risks the bull case glosses over. Project-based revenue is lumpier and less predictable than the recurring services base, so a quarter of 27% growth can give way to an air pocket if data-center or energy-storage bookings slow. The segment is also small enough that the valuation read on it is sensitive to assumptions, and the broader data-center construction boom it depends on is itself a cycle that will eventually normalize. Meanwhile the price already implies only a modest decline in the premium segment, so the market is not pricing in distress, it is pricing in continuation. The bear case is that you are paying a full multiple for a leveraged, thin-margin business whose exciting growth segment is project-lumpy and cyclical, with an asset base that earns barely its cost of capital. If the Technical Solutions cycle cools while the debt stays, the equity has little cushion.

Valuation

The price decomposes onto the Aviation segment, which carries the priced-in premium, and inverting it produces a modest assumption: operating growth of roughly negative 5% per year for five years, solved at a 7% cost of capital. Treat that as approximate, and note the read is moderate-confidence because the segment is small enough that the answer is sensitive to assumptions. The headline is that the price embeds slight decline in the premium segment, which reads as within range. The market is not asking ABM to grow heroically, it is asking the premium segment merely not to deteriorate too fast, a low bar that the company's recent bookings momentum comfortably clears.

The valuation X-ray is genuinely mixed, and the mix is the message. The relative methods cluster right at the price: the sector P/E method lands near $44, EV/EBITDA near $37, the Graham number near $42. The asset and earnings-power methods land below, in the high $20s to low $30s (excess return near $29, Earnings Power Value near $32, capitalized FCF near $29), because the business earns close to its cost of capital and those methods do not credit much growth. The only methods well above the price are the exit-multiple DCF near $72 and a couple of dividend-growth methods that assume strong growth phases. So the central tendency, blended near $41, sits just below the $44 price. ABM is priced about fairly, perhaps a touch full, on its current economics.

The leverage is the factor that should keep a buyer disciplined. Net debt near $1.78 billion is about 5.7 times operating income with coverage around 3 times, which is a real constraint for a thin-margin business. The valuation conclusion is that ABM is fairly valued on its blended fundamentals, with the asset frame flagging it as slightly expensive and the relative frame calling it fair. The bull-versus-bear question is not really about the price, which is reasonable, but about the Technical Solutions trajectory: if the data-center and microgrid growth re-rates the business toward a higher multiple, the current price is a fair entry, and if that growth proves cyclical and lumpy, the leveraged, low-return base is what the buyer is left holding at a full multiple.

Catalysts

The second-quarter fiscal 2026 report, released in early June, was a record-revenue quarter that lifted the stock. Organic revenue grew 6.1%, and first-half new-sales bookings reached a record $1.2 billion. The standout was Technical Solutions, where revenue rose 27% year over year to $267.3 million, including 22% organic growth, on strong data-center, battery-energy-storage, and HVAC project activity. Management highlighted a microgrid win with a major big-box retailer and pointed to margin and free-cash-flow improvement expected in the second half of the fiscal year.

The forward catalysts center on the Technical Solutions cycle and the balance sheet. The items to watch are the durability of data-center, microgrid, and energy-storage bookings that drove the segment's growth, the conversion of the record backlog into revenue and margin, labor-cost trends across the recurring facility-services base, and any progress reducing the leverage. Because the premium segment is project-based, bookings cadence quarter to quarter is the key tell for whether the growth is a durable multiyear cycle or a lumpy spike. The next quarterly print, in the early-September window, will show whether the Technical Solutions momentum and the second-half margin improvement are tracking. Continued strong bookings with margin expansion would support a re-rating toward an infrastructure-services story; a bookings slowdown would leave the leveraged, low-margin base exposed.

Sources: ABM Industries Q2 2026 earnings (investing.com, stocktitan.net); ABM Q2 2026 record-bookings coverage (intellectia.ai); ABM Q2 2026 earnings call transcript (fool.com, 2026-06-08).

Peer Cohorts (Per Segment, With Filing Citations)

Business & Industry / Education (reported)

Manufacturing & Distribution (reported)

Aviation (reported)

Technical Solutions (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive ABM report on boothcheck