Aramark (ARMK): what the price requires
At today's price, Aramark (ARMK) is priced for +23.4% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/ARMK
Headline
| Field | Value |
|---|---|
| Ticker | ARMK |
| Company | Aramark |
| Current price | $58.15/sh |
| Composition | Business & Industry 10% / Education 21% / Healthcare 9% / Sports, Leisure & Corrections 23% / Facilities & Other 9% / Europe 16% / Rest of World 13% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 2.7% |
| Operating margin today | 4.3% |
| Margin compression implied | -1.6pp |
| Implied growth | 23.4% |
| Multiple paid | 27x 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.
Solve inputs: computed at a 9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.9pp.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | +0.59σ |
| cohort percentile (of 212 peers) | 76 |
| sustained it ~5 years at this level | 33% |
| implied end-window share | 0% |
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 3.69x | 4 | expensive |
| Earnings | 4.01x | 3 | expensive |
| Relative | 1.16x | 5 | expensive |
| Growth | 1.01x | 1 | expensive |
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 7.6%); the inversion above states its own rate.
Per-Model Detail (n=13)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $0.00 | — | no | Negative/zero FCF — equity value floored at $0 |
| DCF Exit Multiple | Growth | $0.00 | — | no | Negative/zero FCF or EBITDA — equity value floored at $0 |
| Relative Valuation | Relative | $50.07 | 1.16x | yes | P/E 32.62x (blended: static sector reference 28x + trailing (TTM) 43x), scenarios: 27.0x / 32.6x / 38.2x (bear / base = reference held flat / bull), EV/EBITDA 18x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $14.49 | 4.01x | yes | BV/sh $12.31, ROE (TTM) 10.9%, ke 9.3% |
| Two-Stage Excess Return | Asset | $15.67 | 3.71x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $57.85 | 1.01x | yes | Rev $19.4B, growth 10% (input: historical growth; tapered), Terminal P/S: 0.7x / 0.8x / 0.9x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $17.42 | 3.34x | yes | EPS $1.34, growth 13% (input: historical EPS growth), PEG=3.34 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $5.18 | 11.23x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.73B × (1−26%) / WACC 7.6% → EPV (no growth) |
| Residual Income | Asset | $15.89 | 3.66x | yes | BV $12.31 + 5yr PV of (ROE (TTM) 10.9% − Kₑ 9.3%) × BV; BV grows 7.1%/yr |
| Graham Number | Asset | $19.27 | 3.02x | yes | √(22.5 × EPS $1.34 × BVPS $12.31) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $51.85 | 1.12x | yes | EBITDA $1.10B × sector EV/EBITDA 18.0x |
| FCF Yield | Earnings | — | — | no | — |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $38.74 | 1.50x | yes | EPS $1.34 × (8.5 + 2×13.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $2.86 | 20.33x | yes | BV $12.31 × (ROIC 1.8% / WACC 7.6%) (excluded from median) |
| P/Sales Sector | Relative | $327.95 | 0.18x | yes | Revenue $19.41B × sector P/S 4.5x |
| PEG Fair Value | Relative | $26.13 | 2.23x | yes | EPS $1.34 × (PEG 1.5 × growth 13.0% (input: historical EPS growth)) → PE 19.5x |
| Earnings Yield | Earnings | $14.49 | 4.01x | yes | EPS $1.34 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $5.6b |
| Net debt / NOPAT (after-tax) | 9.52x |
| Net debt / operating income (pre-tax) | 7.07x |
| Share count CAGR (buyback) | -7.1% |
| Burning cash | yes |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Aramark runs food and facilities services across stadiums, schools, hospitals, prisons, and workplaces, a high-volume, thin-margin business where operating profit is only about 4% of nearly $19.4 billion in revenue.
- Growth is accelerating from new contracts: organic revenue grew 12% in fiscal Q2 2026, new client wins reached $1 billion year-to-date, and a hyperscaler data-center contract is set to become the largest in the company's history.
- The constraint is the balance sheet: net debt of about $5.6 billion is roughly seven times operating income, so a large share of every dollar of profit goes to lenders before it reaches owners.
Bull Case
Start with the obvious objection, because the bull case has to answer it. Aramark earns an operating margin of only about 4%, the kind of razor-thin profitability that makes a business look fragile and leaves little room for error. But thin margins are how contract food and facilities services has always worked, and the question that matters is not the level of the margin, it is the direction and the volume underneath it. On that test the recent data is strong. Organic revenue grew 12% in fiscal Q2 2026 to $4.8 billion, and adjusted operating income margin expanded 50 basis points in the quarter. A low margin that is widening on a growing revenue base compounds into real operating-profit growth, which is exactly what the price is paying for.
The growth is coming from winning new contracts, the cleanest signal in this business. New client wins reached $1 billion year-to-date, an unprecedented pace, and net new business contributed about 5% of organic growth in the quarter. The company competes in a market it describes as having "significant competition in the food and support services business from local, regional, national and international companies", so taking share at this rate against well-resourced rivals is evidence of a real commercial advantage, not just a rising tide.
The single most striking development is the move into data-center services. The company's initial contract with a hyperscaler is set to become the largest in Aramark's history, with annualized revenue potential of several hundred million dollars, and it is not yet reflected in current guidance. That matters twice over: it opens a large new vertical riding the same AI-infrastructure buildout powering the rest of the market, and it is upside the published outlook does not yet count. Management raised fiscal 2026 organic revenue guidance to the high end of its 7% to 9% range and reaffirmed adjusted earnings-per-share growth of 20% to 25%. The bull case is that a defensive, recurring services business is quietly turning into a share-gaining growth story with margin leverage and a new vertical the price has not yet paid for.
Bear Case
The price is leaning on a specific chain of assumptions, and the most fragile link is margin expansion compounding for years. At about $53 (June 27, 2026) the units trade near 25 times operating income, which inverts to roughly 21% annual operating-profit growth sustained for five years. That is a demanding bar for a business whose operating margin is only about 4%, because the math depends on both revenue growing and the margin widening at the same time, repeatedly. A single bad cost cycle breaks it. Food and labor inflation, the two largest costs in this business, are exactly the variables Aramark does not control, and many of its contracts pass cost through only with a lag. If wages or food costs run ahead of the repricing, the margin expansion the price assumes reverses into compression.
The second fragile assumption is that the leverage stays benign. Net debt of about $5.6 billion is roughly seven times operating income, and the company's own filing warns that its indebtedness risks "placing us at a competitive disadvantage compared to our competitors who are less highly leveraged". The structural cost of that debt shows up in returns: the return on the total capital invested in the business is barely above 1%, a sign that the goodwill and debt from past acquisitions are not yet earning their keep. The filing is also explicit that breaching its leverage covenant could "result in the requirement to immediately repay all amounts outstanding under the Credit Agreement". A highly levered, thin-margin business has a narrow path: it must grow into the debt, and a stumble in margin or a rise in rates widens the gap rather than closing it.
The third dependency is the new-vertical narrative itself. The hyperscaler data-center contract is genuinely promising, but it is one contract, not yet in guidance, and the bull case increasingly leans on it to justify a premium multiple. Concentrating the growth story on a single marquee win introduces exactly the customer-concentration risk a contract services business is supposed to diversify away. If that contract underdelivers, ramps slower than hoped, or the broader new-business pipeline cools from its current record pace, the price has paid for a growth rate the demonstrated economics, low margins, low returns on capital, and heavy debt, do not comfortably support.
Valuation
What the price is betting is straightforward and demanding. At about $53 a share, Aramark trades near 25 times company-wide operating income, which inverts to roughly 21% annual operating-profit growth sustained for about five years. Keep the figure approximate; it is one solve under fixed assumptions. The nuance the inversion flags is that the rate is within what Aramark has recently delivered, so the stretch is in how long that pace must persist, not in whether it is achievable for a year. Historically only about a third of comparable fast-growers sustained that pace for five years.
The methods split along the line that separates a growth bet from a value one. The relative-multiple family is what justifies the price: a sector price-to-earnings near 28 times and a sector EV-to-EBITDA comparison both land in the high $40s to low $50s, right around the current price. The asset and earnings-power families land far below, in the mid-teens, because the business carries a low return on equity and heavy goodwill from past deals. Read together, the price is supported by what peers in the broader services and consumer space trade at, not by what the company's own assets or current earnings power would independently support. That makes the multiple a relative-value judgment that holds only as long as the growth and margin trajectory keeps pace.
Solvency is the part of the picture the buyer must weigh most carefully, because this is a levered company. Net debt of about $5.6 billion sits at roughly seven times operating income, which means a meaningful slice of operating profit is committed to interest before any reaches equity holders. The decisive question the valuation poses is whether the accelerating organic growth and widening margin can compound fast enough, for long enough, to both service the debt and grow into a 25-times multiple. The data-center contract and the record new-business pace are the upside the price has not fully counted; the leverage and the thin margin are why the downside, if growth stalls, is amplified.
Catalysts
Fiscal second-quarter 2026 results, reported in May, showed the growth accelerating. Organic revenue grew 12% to $4.8 billion, including an estimated 3% benefit from a calendar shift, and adjusted operating income margin expanded 50 basis points. Base growth split into about 3% pricing and 1% volume, with net new business adding roughly 5%. These are company-defined organic and adjusted measures; the GAAP earnings base remains thinner.
The forward catalysts are the raised outlook and one marquee contract. Management lifted fiscal 2026 organic revenue guidance to the high end of its 7% to 9% range, reaffirmed adjusted operating income growth of 12% to 17%, and reaffirmed adjusted earnings-per-share growth of 20% to 25%. New client wins reached $1 billion year-to-date. The standout is the hyperscaler data-center contract, set to become the largest in the company's history with annualized revenue potential of several hundred million dollars and explicitly not yet in 2026 guidance. The next several quarters will test whether that contract ramps as framed and whether the margin expansion holds against food and labor costs; both feed directly into the growth rate the price requires.
Peer Cohorts (Per Segment, With Filing Citations)
FSS United States (reported)
- ABM (ABM INDUSTRIES INCORPORATED)
- FY2025 10-K: …abm:BusinessAndIndustryMember 2024-11-01 2025-10-31 0000771497 abm:FacilityServiceLineAviationServicesMember abm:ManufacturingAndDistributionMember 2024-11-01 2025-10-31 0000771497 abm:FacilityServiceLineAviationServicesMember abm:AviationMember 2024-11-01 2025-10-31 0000771497…
- FY2025 10-K: PlansDefinedBenefitMember 2023-11-01 2024-10-31 0000771497 abm:WesternConferenceofTeamstersPensionPlanMember us-gaap:PensionPlansDefinedBenefitMember 2022-11-01 2023-10-31 0000771497 abm:IUOEStationaryEngineersLocal39PensionPlanMember us-gaap:PensionPlansDefinedBenefitMember 2024-11-01 2025-10-31 0000771497…
- HCSG (HEALTHCARE SERVICES GROUP, INC.)
- FY2025 10-K: …expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of primarily healthcare facilities, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. We provide such services to approximately 2,800…
- FY2025 10-K: Level2Member 2025-12-31 0000731012 us-gaap:FixedIncomeInvestmentsMember us-gaap:FairValueInputsLevel3Member 2025-12-31 0000731012 hcsg:InternationalMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2025-12-31 0000731012 hcsg:InternationalMember us-gaap:EstimateOfFairValueFairValueDisclosureMember…
- CTAS (Cintas Corporation)
- 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…
- FY2025 10-K: …false 0000723254 2025 FY http://fasb.org/us-gaap/2025#OtherAssetsNoncurrent http://fasb.org/us-gaap/2025#OtherAssetsNoncurrent iso4217:USD xbrli:shares iso4217:USD xbrli:shares ctas:business xbrli:pure ctas:reportingUnit 0000723254 2024-06-01 2025-05-31 0000723254 2024-11-30 0000723254 2025-06-30 0000723254…
FSS International (reported)
- CTAS (Cintas Corporation)
- FY2025 10-K: …growth in revenue and improvements in gross margin. Income before income taxes as a percent of revenue was 23.5% compared to 22.2% in fiscal 2024. The improvement over the prior fiscal year was primarily a result of the previously discussed improvement in gross margin. First Aid and Safety Services Reportable…
- FY2025 10-K: …in the First Aid and Safety Services reportable operating segment and All Other. Cost of other includes inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, service costs and other costs of distribution. Selling and administrative expenses. Selling and administrative expenses…
- ABM (ABM INDUSTRIES INCORPORATED)
- FY2025 10-K: …the performance obligation satisfied to date. The time between completion of the performance obligation and collection of cash is generally 30 to 60 days. Sales-based taxes are excluded from revenue. Contracts generally can be modified to account for changes in specifications and requirements. We consider contract…
- FY2025 10-K: …abm:BusinessAndIndustryMember 2024-11-01 2025-10-31 0000771497 abm:FacilityServiceLineAviationServicesMember abm:ManufacturingAndDistributionMember 2024-11-01 2025-10-31 0000771497 abm:FacilityServiceLineAviationServicesMember abm:AviationMember 2024-11-01 2025-10-31 0000771497…
- HCSG (HEALTHCARE SERVICES GROUP, INC.)
- FY2025 10-K: …general and administrative expenses; the impact of past or future cyber attacks or breaches; global events including ongoing international conflicts; and the risk factors described in Part I of this report under "Government Regulation of Customers," "Service Agreements and Collections," and "Competition" and under…
- FY2025 10-K: …is of material significance to our total assets. Management does not foresee any difficulties with regard to the continued utilization of these premises. We also believe that such properties are sufficient to support our current operations. Item 3. Legal Proceedings. In the normal course of business, the Company is…
- CAKE (THE CHEESECAKE FACTORY INCORPORATED)
- FY2025 10-K: …In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies interim disclosure requirements by improving the navigability of the required interim disclosures and clarifying when that guidance is applicable. The standard is effective for interim reporting…
- FY2025 10-K: …in the following areas: Culture Cultivating and maintaining our culture is a key strategic focus. Our core values and purpose reflect who we are and how our staff members interact with one another, as well as with our customers. We believe our efforts to build and maintain a strong culture have contributed to two…
- EAT (BRINKER INTERNATIONAL, INC.)
- FY2025 10-K: …We evaluated the timing of breakage revenue recognition by analyzing historical redemption patterns and assessing the volume of redemptions subsequent to the period of breakage revenue recognition. We also involved actuarial professionals with specialized skills and knowledge, who assisted in assessing the…
- FY2025 10-K: …on our business including consumer demand, costs, product mix, our strategic initiatives, operations, technology and assets, and our financial performance; the impact of current and potential tariffs and trade barriers; the impact of competition, including competitors employing our same strategies or discounting…
- TXRH (Texas Roadhouse, Inc.)
- FY2025 10-K: …Pre-opening expenses, which are charged to operations as incurred, consist of expenses incurred before the opening of a new or relocated restaurant and consist principally of opening team and training team compensation and benefits, travel expenses, rent, food, beverage, and other initial supplies and expenses. Fair…
- FY2025 10-K: …safety and sanitation standards, food appearance, freshness, portion size, and crisis management. The product coach team supports all of our full-service domestic restaurants. Food safety and sanitation is of utmost importance to us. We currently utilize several additional programs to help facilitate adherence to…
- YUMC (Yum China Holdings, Inc.)
- FY2025 10-K: …guidance regarding certain CAMT issues before proposed regulations are published. The Company will monitor the regulatory developments and continue to evaluate the impact on our financial statements, if any. 120 2025 Form 10-K In December 2022, a refined Foreign Sourced Income Exemption ("FSIE") regime was published…
- FY2025 10-K: …the option to elect a practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets. ASU 2025-05 is effective for the…
- CMG (CHIPOTLE MEXICAN GRILL, INC.)
- FY2025 10-K: …management; the effectiveness of our food safety and cybersecurity programs; our plans for continuing stock buybacks; and all other statements that are not historical facts. Forward-looking statements are based on currently available operating, financial and competitive information and our actual future results and…
- FY2025 10-K: …instances of food-borne illness or food safety issues that occur solely at competitors' restaurants or at suppliers or distributors (even if we do not work with them) could result in negative publicity about the restaurant industry and adversely impact our sales. The occurrence of food-borne illnesses or food safety…
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.
- 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.
Sources
Q2 FY2026 earnings, May 12 2026 · FY2025 10-K