ABM INDUSTRIES INCORPORATED (ABM): what the price assumes

boothcheck covers ABM INDUSTRIES INCORPORATED (ABM) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/ABM

Headline

What The Price Assumes (Inversion)

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

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in 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 6.9% sits below it).

How unusual the bet is: within-range (limited comparison data)

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.

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=14)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Janitorial work sold under contract is about 60% of revenue, and the whole company converts that revenue into a 3.7% operating margin, so the gap between a good year and a poor one is measured in cents per labor hour rather than in new markets entered.

• Debt is the live constraint: roughly $1.8 billion of net debt sits at about 5.5 times trailing operating profit, that profit covers interest 3.2 times, and management now expects fiscal 2026 interest expense of around $110 million.

• The next read is the fiscal third-quarter report on September 4, 2026, when the restructuring the company says will produce approximately $35.0 million of annualized cost savings once fully implemented in 2026 should start showing up in segment margins.

Bull Case

Follow the cash and the thesis assembles itself. Over the four years to April 2026 the share count fell at about 3.3% a year, which is buyback deployment showing up in the one place it cannot be dressed up. The dividend kept running through the same stretch. The company made $23.1 million of principal payments under the term loan in fiscal 2025 while still funding the systems and technology work it calls ELEVATE. None of those uses is glamorous. Together they describe a management team that thinks the most attractive asset available to it is the business it already owns.

What that business is deserves a second look, because the label undersells it. ABM sells contracted labor into buildings, airports and factories, and a meaningful share of that labor is billed on a pass-through basis. The 10-K is explicit about the mechanism: Cost-plus arrangements are contracts in which the clients reimburse us for the agreed-upon amount of wages and benefits, payroll taxes, insurance charges, and other expenses. Wage inflation is the risk that sounds most lethal for a company employing tens of thousands of frontline workers. In a good part of the book it lands on the client.

The growth, meanwhile, is not coming from janitorial. Technical Solutions revenues increased by $151.3 million in fiscal 2025, or 18.7%, and its operating margin improved to 9.0% from 8.6%. That is the fastest-growing reportable segment ABM has, and its margin now sits close to the best one. Inside that segment is the 2022 purchase of RavenVolt, which the 10-K describes as a leading nationwide provider of advanced turn-key microgrid systems utilized by diversified commercial and industrial customers, national retailers, utilities, and municipalities. Electrical infrastructure work is a different business from cleaning offices, with different customers and a different reason to hire. ABM has been quietly buying its way into it.

The peers in that adjacent cohort show what the destination looks like. APi Group describes itself as running life safety, security, elevator and escalator, and specialty services with a substantial recurring revenue base and over 500 locations worldwide, and EMCOR reaches its customers through approximately 100 operating subsidiaries, which specialize principally in providing construction services relating to electrical and mechanical systems in all types of facilities. These are dense, service-heavy franchises built on repeat visits rather than one-off projects. ABM is starting from the densest route network of all, since it is already inside the building every night.

Execution in the existing base is also improving where management has direct control. Education operating profit rose 22.2% to $67.7 million in fiscal 2025 and its margin gained 122 basis points to 7.3%, which the filing attributes to operational efficiencies, particularly in managing overtime. Aviation profit rose 10.3% to $65.2 million. Business and Industry, the largest reportable segment, lifted its margin to 7.7% from 7.6% on revenue up only 1.6%, a gain the filing puts down to geographic mix and operational efficiencies. On top of that sits a restructuring the company expects to deliver approximately $35.0 million of annualized cost savings once fully implemented in 2026, against $13.4 million of charges booked in the fourth quarter of fiscal 2025.

The bear will point at Manufacturing and Distribution, where operating profit fell 8.9% and the margin gave back 134 basis points to 9.4% for a reason the filing names plainly: strategic pricing for select new wins. That is fair. But a facilities contractor that trades margin for multi-year contracted volume in its second-best segment is making a defensible trade, not losing pricing power. The wins stay on the books for years; the margin concession is priced once.

Finally, the capital structure is workable rather than punishing. The lending group extended ABM's facility to February 2030, increasing the capacity of the revolving credit facility from $1.3 billion to $1.6 billion, which is what banks do for a borrower whose collections they trust. The business funds itself: Net cash provided by operating activities was $234.4 million during 2025, up on the prior year. A company generating that much internally, shrinking its share count and building an electrical-services arm alongside the cleaning contracts does not need the market to reprice it in order to keep compounding value for the people who own it.

Bear Case

The valuation methods split cleanly here, and the split is the argument. Approaches that ask what ABM earns on the capital already sitting in the business put it near book value. Approaches that ask what a facilities-services company fetches in the market put it near today's price. The conservative half of that disagreement has the better claim to being the honest read, and the reason is visible in one comparison.

Book value is $29.58 a share. Return on equity over the trailing twelve months is 9.1%. The return shareholders require for carrying this kind of business is 9.3%. A company earning slightly less on its equity than its owners need adds nothing by retaining earnings, which is why today's price sits about 66% above where the book-value-plus-profitability approaches land, and stays there no matter how many years you run them forward. The earnings-power approaches arrive in the same neighbourhood by a different road: capitalize the company's free cash flow at that same required return, credit no growth, subtract the debt, and the price sits roughly 63% above the result. Two independent families, one answer.

Only two families come close. Peer multiples get within about 8% of the price, working off the sector's own earnings multiple. The cash-flow approach clears the price comfortably, but the way it does so matters: it carries today's exit multiple held flat six years out, with the bear scenario compressing it and the bull expanding it. Holding the multiple flat is an input to that calculation, not a conclusion it reached. Strip the assumption and the method has nothing left to say.

The operating evidence leans toward the conservative reading. Manufacturing and Distribution, the second-largest reportable segment, saw operating profit fall $14.9 million, or 8.9%, to $151.4 million in fiscal 2025, with the margin surrendering 134 basis points to 9.4% for a reason the filing states without decoration: strategic pricing for select new wins. Growth in contracted labor is purchasable, and the price is margin. In Business and Industry, revenue rose only 1.6% and the filing notes the year included the loss of a certain customer in the first quarter of 2025. Contracts in this industry are re-bid on schedule, and the incumbent does not always keep them.

Then there is a liability the income statement flatters. ABM runs a wholly owned captive insurance subsidiary, to manage potential liabilities associated with automobile liability, general liability, and workers' compensation risks, and the 10-K is candid that the ultimate cost of certain claims, especially workers' compensation and general liability claims, may not be fully determined for several years. Every reported quarter of profit therefore rests partly on an actuarial estimate that can be revised long after the quarter closes. For a company whose entire operating margin is 3.7%, reserve revisions are not a rounding item.

Leverage is what turns all of this from an argument about quality into an argument about outcomes. Net debt of roughly $1.78 billion stands at 5.45 times operating profit before tax, or 7.55 times operating profit after tax. That profit covers interest 3.2 times, and management expects fiscal 2026 interest expense of about $110 million. At the end of fiscal 2025, the total outstanding borrowings and standby letters of credit were $1,569.0 million and $23.5 million. Net of the cash on hand, the lenders' claim is roughly two-thirds the size of the entire equity market value, and it sits ahead of shareholders in the queue.

The honest form of the bear case is not that the price demands heroics, because it does not. At about 14 times operating income the market is asking for very little. The bear case is that the little it asks for is still uncertain, and that the equity is a thin residual on top of a large fixed claim. One percentage point of operating margin on a $9.05 billion revenue base is worth more than half the $158.5 million ABM earned in net income over the trailing year. The business does not have to deteriorate much for the equity to feel it a great deal.

Valuation

At $47.71 the whole enterprise is priced at about 14 times its trailing operating income. That is not a multiple that requires anything to go right. Run the arithmetic in reverse and the price sits below what even a steady mid-single-digit annual decline in operating profit would warrant, which is another way of saying the market is paying nothing at all for growth here. Set against other companies in the sector, the multiple sits in the lower half of the range.

The most concrete version of what has to be true is smaller still. Carried out over a twelve-year horizon, today's price is consistent with ABM sustaining an operating margin of roughly 2.3%. It earned 3.7% over the trailing year. The bar sits below where the company already operates, and that framing is the useful one, because it moves the question away from whether ABM can grow and toward whether it can hold what it has.

The methods used to triangulate the business do not agree, and the disagreement is not about growth. The price sits about 66% above where book-value-plus-profitability approaches land and about 63% above the earnings-power approaches, and both gaps trace to the same fact: ABM earns 9.1% on equity against a 9.3% required return, so neither retained book nor capitalized cash flow reaches today's quote without assuming an improvement. Peer multiples nearly close the gap, working off the sector's own earnings multiple, which is what a market-comparison lens would say a mid-margin services roll-up is worth. The discounted cash-flow approach is the only one that lands above the price, and it does so by holding today's exit multiple flat through year six. The pattern is a company priced roughly where trading comparables place it and well above what its own returns on capital justify.

The cohort adds a useful calibration. Rollins, a route-density services business in the same comparison group, disclosed that organic revenue* growth was 6.9% with acquisitions adding 4.1% during the year for its 2025 year. ABM's fiscal second quarter of 2026 ran 6.1% organic with 2.3% from acquisitions. The top-line shapes are similar. What differs is where the money lands. ABM converts $9.05 billion of revenue into a 3.7% operating margin at the company level, and even its strongest reportable segments, before corporate costs are absorbed, sit in single digits.

Which brings the balance sheet into the middle of the picture rather than the end of it. Net debt of about $1.78 billion equals 5.45 times operating profit before tax, or 7.55 times operating profit after tax, and that profit covers interest 3.2 times. ABM is not consuming cash, and the share count has fallen about 3.3% a year since April 2022. Liquidity is adequate: at the end of fiscal 2025 the company had up to $577.5 million of borrowing capacity available to it. The debt is also the reason a 14 times operating-income multiple is not automatically a bargain. The enterprise carries a value near $4.7 billion, and $1.8 billion of that is owed before a dollar reaches the shareholder. What looks undemanding at the enterprise level is levered by the time it reaches the equity.

Catalysts

The fiscal second quarter, reported on June 5, 2026, set a company record for the period. Revenue rose 8.4% to a second-quarter record of $2.3 billion, split between 6.1% organic growth and 2.3% from acquisitions, and new sales bookings reached a first-half record of $1.2 billion. Reported net income was $43.1 million, or $0.73 a diluted share, against $42.2 million and $0.67 in the same quarter a year earlier. Bookings matter more than the quarter itself in this business. Contracted services revenue arrives with a lag, so a record first half of sales is a claim on the next several quarters rather than this one.

Management reaffirmed its full-year outlook alongside the print, guiding organic revenue growth to the high end of a 3% to 4% range and total growth to the high end of 4% to 5%, with the difference coming from the WGNSTAR acquisition. It also set fiscal 2026 interest expense at approximately $110 million and a normalized tax rate of 29% to 30%. The interest figure is the one to hold onto. It is a fixed charge against an operating profit base of $327.3 million, and it does not shrink because a quarter went well.

Two things resolve next. The fiscal third quarter is scheduled for September 4, 2026, and it is the first period in which the restructuring announced in late fiscal 2025 should be visibly contributing. The company has told investors that program will deliver approximately $35.0 million of annualized cost savings once fully implemented in 2026, having taken $13.4 million in restructuring charges in the fourth quarter of fiscal 2025. On a company earning a 3.7% operating margin, $35 million of permanent cost removal is a meaningful share of the profit line, and the September report is where it either appears in segment margins or does not.

Peer Cohorts (Per Segment, With Filing Citations)

Business & Industry / Education (reported)

• ARMK (Aramark)
• FY2025 10-K: …& Industry, Sports and Leisure & Corrections, Education and Healthcare sectors. The Facilities & Other sector decrease resulted from the exit of some lower margin accounts late in the prior year period, partially offset by increased revenues from procurement services. Adjusted Operating Income The Facilities & Other…
• FY2025 10-K: …contract price increases, especially within our Higher Education and Corrections businesses, contributed to year-over-year growth. The Facilities & Other sector increase was attributable to base business growth, which was partially offset by lost business occurring late in fiscal 2024. The Healthcare sector decrease…
• CTAS (Cintas Corporation)
• FY2025 10-K: …our products and services to over one million businesses of all types, from small service and manufacturing companies to major corporations that employ thousands of people. This diversity in customer base results in no individual customer accounting for greater than one percent of Cintas' total revenue. As a result,…
• FY2025 10-K: …ctas:UniformRentalAndFacilityServicesSegmentMember 2022-06-01 2023-05-31 0000723254 us-gaap:OperatingSegmentsMember ctas:FirstAidAndSafetyServicesSegmentMember 2022-06-01 2023-05-31 0000723254 us-gaap:OperatingSegmentsMember us-gaap:AllOtherSegmentsMember 2022-06-01 2023-05-31 0000723254…
• UNF (UNIFIRST CORPORATION)
• FY2025 10-K: …Solutions and Other. Refer to Item 1, " Business " and Note 15, " Segment Reporting " to our Consolidated Financial Statements for our disclosure of segment information. We have recast certain prior period segment results to conform with the current presentation. The Uniform & Facility Service Solutions segment…
• FY2025 10-K: …safety training, to a variety of manufacturers, retailers and service companies. We serve businesses of all sizes across multiple industries and sectors. We provide our products and services to over 300,000 customer locations in the U.S., Canada and Europe. U.S. GAAP establishes standards for reporting information…
• ROL (ROLLINS INC)
• FY2025 10-K: …2025 to 2024, organic revenue* growth was 6.9% with acquisitions adding 4.1% during the year. Residential pest control revenue increased approximately 10%, commercial pest control revenue increased approximately 11% and termite and ancillary services grew approximately 14% including both organic and…
• FY2025 10-K: ; A focus on ongoing modernization efforts, a culture of continuous improvement and pricing should support an improving margin profile. • Compounding operating cash flow and a strong balance sheet should continue to enable a balanced capital allocation strategy. 30 Table of Contents The Company expects to report 7% to…

Manufacturing & Distribution (reported)

• ARMK (Aramark)
• FY2025 10-K: …for Internal-Use Software (Subtopic 350-40) , to modernize the accounting guidance for the costs to develop software for internal use. The standard applies to costs incurred to develop or obtain software for internal use. ASU 2025-06 amends the existing standard that refers to various stages of a software development…
• FY2025 10-K: …our results of operations. There is significant competition in the food and support services business from local, regional, national and international companies, of varying sizes, many of which have substantial financial resources. Our ability to successfully compete depends on our ability to provide quality services…
• CTAS (Cintas Corporation)
• FY2025 10-K: …to the distribution center in Cincinnati, Ohio. Certain facilities are utilized by multiple operating segments. These facilities are only presented once, in their primary operating segment, herein. Rental processing plants, rental branches, distribution centers and manufacturing facilities are used in Cintas' Uniform…
• FY2025 10-K: …could suffer. Although we conduct due diligence investigations prior to each acquisition, there can be no assurance that we will discover or adequately protect against all material liabilities of an acquired business for which we may be responsible as a successor owner or operator. The failure to identify suitable…
• UNF (UNIFIRST CORPORATION)
• FY2025 10-K: …to end customers. The direct sales market is highly fragmented and includes national, regional, and local providers. The level of competition varies by geographic area and product category. The principal sources of differentiation in the industry are the range of products and services, the quality of service, and…
• FY2025 10-K: …Solutions and Other. Refer to Item 1, " Business " and Note 15, " Segment Reporting " to our Consolidated Financial Statements for our disclosure of segment information. We have recast certain prior period segment results to conform with the current presentation. The Uniform & Facility Service Solutions segment…
• APG (APi Group Corporation)
• FY2025 10-K: …discounts and vendor pricing. Customers We have long-standing relationships with many customers in each of the industries we serve. We serve customers in both the public and private sectors, including high tech services, advanced manufacturing, healthcare, fulfillment and distribution centers, critical…
• FY2025 10-K: …base of installed projects, cross-selling opportunities, and customer relationships to continue to grow inspection, service, and monitoring revenue. 6 Table of Conten t s • Project Revenue Discipline - We also drive organic growth by maintaining disciplined project selection, ensuring we pursue project work that…
• EME (EMCOR Group, Inc.)
• FY2025 10-K: …customers through approximately 100 operating subsidiaries, which specialize principally in providing construction services relating to electrical and mechanical systems in all types of facilities and in providing various services relating to the operation, maintenance, and management of those facilities. Such…
• FY2025 10-K: Controls and filtration systems; • Water and wastewater treatment systems; • Central plant heating and cooling systems, including manufacturing and installing sheet metal air handling systems; • Millwright services; and • Steel fabrication, erection, and welding services. The electrical and mechanical construction…

Aviation (reported)

• ARMK (Aramark)
• FY2025 10-K: 10. 61 † Form of Deferred Stock Unit Agreement under the Aramark 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Aramark's Quarterly Report on Form 10-Q filed with the SEC on May 13, 2015, pursuant to the Exchange Act (file number 001-36223)). S-49 Table of Contents 10. 62 † Form of Aircraft…
• FY2025 10-K: …allowance reversals were driven by the Company's ability to utilize DTAs based on future taxable income expected due to business acquisitions and sustained profitability. The Company continues to monitor operating S-34 Table of Contents ARAMARK AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS performance…
• CTAS (Cintas Corporation)
• FY2025 10-K: …results of operations. The price of fuel and energy needed to run our vehicles and equipment is unpredictable and fluctuates based on events outside of our control, including geopolitical developments, supply and demand fluctuations for fuel and other energy related products, actions by energy producers, war and…
• FY2025 10-K: …ctas:UniformRentalAndFacilityServicesSegmentMember 2022-06-01 2023-05-31 0000723254 us-gaap:OperatingSegmentsMember ctas:FirstAidAndSafetyServicesSegmentMember 2022-06-01 2023-05-31 0000723254 us-gaap:OperatingSegmentsMember us-gaap:AllOtherSegmentsMember 2022-06-01 2023-05-31 0000723254…
• UNF (UNIFIRST CORPORATION)
• FY2025 10-K: …investment in systems, technology capabilities, and infrastructure to support future growth. Amortization decreased approximately $3.0 million, due primarily to lower amortization related to the acquisition of Clean Uniform in fiscal 2023. On a combined basis, depreciation and amortization decreased $1.0 million, or…
• FY2025 10-K: …and financial condition. Our success depends on our ability to retain our current customers, renew our existing customer contracts and obtain new customers. Our ability to do so generally depends on a variety of factors, including the quality, price and responsiveness of 7 our services, as well as our ability to…

Technical Solutions (reported)

• EME (EMCOR Group, Inc.)
• FY2025 10-K: …customers through approximately 100 operating subsidiaries, which specialize principally in providing construction services relating to electrical and mechanical systems in all types of facilities and in providing various services relating to the operation, maintenance, and management of those facilities. Such…
• FY2025 10-K: …Connecticut 06851-1092, and our telephone number at those offices is (203) 849-7800. 1 Table of Contents Operations Electrical and mechanical construction and facilities services operations: Our electrical and mechanical construction services primarily involve the design, integration, installation, start-up,…
• APG (APi Group Corporation)
• FY2025 10-K: …Software (Subtopic 350-40): Target Improvements to the Accounting for Internal-Use Software, which improves ASC Subtopic 350-40 to better align the guidance (1) for development of software to be sold via SaaS and software to sold via license by introducing new capitalization considerations and (2) with agile software…
• FY2025 10-K: …and life safety, security, elevator and escalator, and specialty services with a substantial recurring revenue base and over 500 locations worldwide. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The accompanying consolidated financial statements (the "Financial Statements") include the accounts…
• FIX (COMFORT SYSTEMS USA, INC.)
• FY2025 10-K: …for prospectively as a cumulative adjustment to revenue recognized in the current period. Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights…
• FY2025 10-K: …technology failure or a material cybersecurity breach; risks related to our common stock; failure or circumvention of our disclosure controls and procedures or internal control environment; our ability to manage growth and geographically-dispersed operations; severe weather conditions (such as storms, droughts,…
• MTZ (MasTec, Inc.)
• FY2025 10-K: …or other cybersecurity-related matters; • our dependence on a limited number of customers and our ability to replace non-recurring projects with new projects; • risks associated with potential environmental issues and other hazards from our operations; • disputes with, or failures of, our subcontractors to deliver…
• FY2025 10-K: …Resources," for discussion of our capital resources and recent activities. Leverage Core Performance and Expertise through Strategic Acquisitions . We pursue selected acquisitions, investments and strategic arrangements that allow us to expand our operations, service offerings, customer base or geographic reach. We…
• PWR (Quanta Services, Inc.)
• FY2025 10-K: …to fluctuate. Despite these fluctuations and cyclicality, we continue to selectively pursue larger pipeline project opportunities to the extent they satisfy our margin and risk profiles. Additionally, the significant increase in demand for electric power is resulting in an increase in planning for new natural gas…
• FY2025 10-K: …in choosing a service provider, including technical expertise and experience, breadth of solutions offerings, safety ratings, financial and operational resources, geographic presence, industry reputation and dependability, which we expect to benefit larger service providers such as us. In addition, competition may…
• IESC (IES Holdings, Inc.)
• FY2025 10-K: …quality, timeliness and price. We believe that we have a competitive advantage due to our breadth of capabilities, focus on quality, technical support, customer service, and financial resources. Seasonality and Quarterly Fluctuations Infrastructure Solutions' revenues from its custom-engineered bus systems and…
• FY2025 10-K: We may fail to adequately recover on contract change orders. From time to time, we may pursue claims against our customers to recover costs incurred on a project in excess of the original contract amount. Such additional costs may be incurred in connection with project delays caused by our customers or third parties,…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

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.