Aramark (ARMK): what the price assumes

In the published model solve dated 2026-Q2, anchored at $56.78, Aramark (ARMK) is priced for +18.6% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/ARMK

Headline

FieldValue
TickerARMK
CompanyAramark
Sector / IndustryConsumer Cyclical
Current price$56.78/sh
CompositionBusiness & Industry 10% / Education 21% / Healthcare 9% / Sports, Leisure & Corrections 23% / Facilities & Other 9% / Europe 16% / Rest of World 13%

What The Price Assumes (Inversion)

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

FieldValue
Inversion basiswhole-company
Operating margin (value-band context)2.4%
Operating margin today4.4%
Margin compression (value-band)-2.0pp
Implied growth18.6%
Multiple paid24x operating income

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.

Solve inputs: computed at a 8.8% cost of capital with 4% terminal growth over a 5-year stage.

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

ReferenceValue
vs own history+0.32σ
cohort percentile (of 212 peers)76

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

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
Asset3.29x5expensive
Earnings2.45x2expensive
Relative2.11x2expensive
Growth1.20x1expensive

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

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.5%); the inversion above states its own rate.

Per-Model Detail (n=10)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$0.00—noNegative/zero FCF — equity value floored at $0
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative——noP/E 28x (static sector reference · 2026-04), scenarios: 23.3x / 28.0x / 32.7x (bear / base = reference held flat / bull), EV/EBITDA 18x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$15.703.62xyesBV/sh $12.88, ROE (TTM) 11.3%, ke 9.3%
Two-Stage Excess ReturnAsset$17.273.29xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$47.351.20xyesRev $19.8B, growth 11% (input: historical growth; tapered), Terminal P/S: 0.6x / 0.8x / 0.9x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$22.382.54xyesEPS $1.43, growth 16% (input: historical EPS growth), PEG=2.50 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$1.7632.26xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.67B × (1−28%) / WACC 7.6% → EPV (no growth) (excluded from median)
Residual IncomeAsset$17.583.23xyesBV $12.88 + 5yr PV of (ROE (TTM) 11.3% − Kₑ 9.3%) × BV; BV grows 7.3%/yr
Graham NumberAsset$20.352.79xyes√(22.5 × EPS $1.43 × BVPS $12.88) — Graham's conservative floor
EV/EBITDA RelativeRelative——noEBITDA $1.26B × sector EV/EBITDA 18.0x
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$46.141.23xyesEPS $1.43 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$2.8419.99xyesBV $12.88 × (ROIC 1.7% / WACC 7.6%)
P/Sales SectorRelative——noRevenue $19.85B × sector P/S 4.5x
PEG Fair ValueRelative$33.571.69xyesEPS $1.43 × (PEG 1.5 × growth 15.6% (input: historical EPS growth)) → PE 23.5x
Earnings YieldEarnings$15.463.67xyesEPS $1.43 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

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.

UnitRoleValuation basisRevenueReported profitValue evidenceStatus
FSS United Statesoperatingenterprise$13.2b$840.0m operating-incomewithheldunresolved no unit value
FSS Internationaloperatingenterprise$5.3b$260.3m operating-incomewithheldunresolved no unit value

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

FieldValue
Net debt$5.6b
Net debt / NOPAT (after-tax)8.97x
Net debt / operating income (pre-tax)6.47x
Share count CAGR (dilution)0.9%
Burning cashyes

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

Direction is the argument. Second-quarter fiscal 2026 revenue rose 15% to $4.9 billion and operating income rose 26% to $220 million. Profit growing faster than revenue is the hardest single trick in outsourced services, because the cost base is people and people do not get cheaper. The last print delivered it.

Be precise about the quality of that growth, because part of it is a calendar. Organic revenue rose 12%, and about 3 percentage points of that came from comparing against a prior year that had a 53rd week. Strip that out and the underlying pace is still high single digits, produced by the things the annual filing names: including volume growth and contract price increases, and net new business growth, with contract price increases, especially within our Higher Education and Corrections businesses doing a visible share of the work.

The retention figure is the one that compounds. Client retention ran above 98% in the quarter, and new client wins reached $1 billion in the fiscal year to date. In a contract services business those two numbers are the entire economic engine. Winning a university dining contract is expensive, involving bid teams, transition costs and capital put into somebody else's kitchen. Keeping one costs almost nothing. A book that holds above 98% while adding a billion dollars of new work is a book whose acquisition spending is being amortized over a longer life every year.

The revenue mix is built to absorb its own seasonality, which is easy to miss. Sports, Leisure & Corrections is the largest line at about 23% of revenue and Education is 21%, and those two do not peak together. The filing spells out why that matters: our FSS United States segment, there has been a lower level of activity during the first half of our fiscal year in operations that provide services to sports and leisure clients. This lower level of activity, historically, has been partially offset during the first half of our fiscal year by the increased activity levels in our educational operations.

There is also evidence of willingness to shrink where the economics are wrong. The annual report attributes a decline in one sector to the exit of some lower margin accounts late in the prior year period, which is revenue given up on purpose. That shows in the comparison against the closest listed peer in facilities services: ABM converts about 3.5% of revenue into operating profit. Aramark's trailing operating margin is 4.3%. In a business measured in single-digit points, most of a percentage point is not a rounding difference. It is roughly a fifth more profit on the same sales.

Bear Case

Watch what the cash actually did rather than what the growth headline says. Fiscal 2025 financing activity was primarily driven by the repayment of debt instruments, including the term loans due 2027 ($839.3 million), the 5.00% 2025 Notes ($551.5 million), the 3.125% 2025 Notes ($363.4 million) and others. That reads as deleveraging until you follow where the money came from. The same year records the refinancing of the U.S. Term B-8 Loans due 2030 and the issuance of the 4.375% 2033 Notes. The obligations were not retired so much as moved further down the calendar at a new coupon.

The covenant governing all of this deserves a careful read. The credit agreement is policed by a Consolidated Secured Debt Ratio capped at 3.00 to 1.00, and the consequence of breaching it is not a fee: Non-compliance with the maximum Consolidated Secured Debt Ratio could result in the requirement to immediately repay all amounts outstanding under the Credit Agreement. The denominator in that test is Covenant Adjusted EBITDA, and the filing itemizes what gets added back on the way there, including charges related to our spin-off of the Uniform segment ($29.0 million), non-cash adjustments to inventory based on expected usage ($21.7 million), severance charges ($13.0 million) among others. A borrowing limit measured against a figure the borrower helps assemble is a limit of a particular kind.

The scale explains why any of that matters. Net debt is about $5.61 billion, roughly 7.07 times operating profit, with liquid assets of 475.7 million dollars behind it. Management's stated goal is a leverage ratio below 3 times, which is a different ratio on a different denominator. Both statements can be accurate at once, and only one of them describes what a lender sees if operating profit stops growing.

Now the arithmetic the price implies. The market pays about 26 times trailing operating profit for a company whose operating margin is 4.3%. What that requires is operating profit compounding around 22.9% a year across a five-year run. The recent record shows the company can hit that rate; the demanding part is holding it, and roughly a third of comparable fast movers have held a pace like that even for half a decade. The multiple itself sits at the very top of the comparable distribution, past the upper quartile. Pay that for a thin-margin contract business and the leverage stops being a footnote: with debt this size ahead of the equity, a shortfall in operating profit does not reduce the equity proportionally, it reduces it faster.

The cost side offers no cushion. Wages and food are the inputs, both reprice on their own schedule, and the mechanism for recovering them is the contract price increase the filing keeps naming, which arrives on renewal rather than on demand. Currency does its own damage on the international lines, Europe at 16% of revenue and Rest of World at 13%, and the annual report records a year in which growth was offset by the unfavorable impact of foreign currency translation by 6.3%. None of that is fatal. All of it eats the margin of error that a 26 times multiple has already spent.

Valuation

The price is paying about 26 times trailing operating profit for a company that converts 4.3% of revenue into operating profit. Those two facts belong in the same sentence because together they are the entire situation: a thin-margin contract business carrying a rich multiple. Against a share price of $57.13 as of July 25, 2026, what has to be true is operating profit compounding around 22.9% a year across a five-year run, at a rate the company has recently produced but over a stretch that is the demanding part of the assumption.

The methods split the way they usually do for a business being valued on where it is going. Peer multiples and the approach that projects revenue forward come closest to the current quote. The earnings-power lens and the book-value approaches land well underneath it. The earnings-power gap is unusually wide, and the reason is mechanical rather than mysterious: that method capitalizes a five-year average of operating profit at no growth, and here the average sits below the trailing year, then subtracts a debt load larger than the whole equity market value would suggest. Whatever is left over for shareholders after that arithmetic is small by construction. It is a stress test, not a verdict.

Cohort position sharpens the picture more than usual. CTAS turns about 23.0% of revenue into operating profit, running a different model in adjacent buildings. ABM, doing work far closer to this, converts roughly 3.5%. Aramark's operating margin is 4.3%, which is where outsourced food and facilities services actually live. The multiple, however, is priced nearer the first group than the second, and sits at the very top of the comparable distribution, past the upper quartile. That is the disagreement worth holding in mind: the market is applying a compounder's multiple to a labour-intensive contract book.

Leverage decides the shape of the downside. Net debt is about $5.61 billion, roughly 7.07 times operating profit, against liquid assets of 475.7 million dollars. That structure works while contracts reprice and new wins convert, and it is precisely why the equity behaves like a growth security rather than a services one. The share count has been near flat, up about 0.7% a year across the four years through April 2026, so the risk to a holder is not dilution. It is the order in which claims get paid.

Catalysts

The second quarter of fiscal 2026, reported in May 2026, was the strongest print in the recent sequence. Revenue rose 15% to $4.9 billion, organic revenue rose 12% with roughly 3 percentage points of that coming from lapping a 53rd week in the prior year, and operating income rose 26% to $220 million. Client retention ran above 98% and new client wins reached $1 billion in the fiscal year to date.

Management moved its full-year organic revenue expectation to the high end of the previously stated 7% to 9% range and reiterated a target leverage ratio below 3 times. The first of those is a statement about demand and pricing; the second is a statement about what management intends to do with the profit that demand produces, and the two are competing for the same dollars.

Third-quarter fiscal 2026 results are scheduled for August 11, 2026, with a conference call at 8:30 a.m. Eastern the same morning. Three things in that report will carry more information than the revenue line: whether organic growth holds once the extra week has washed out of the comparison, whether the new business added this year arrives with margin attached or only with volume, and where the leverage ratio actually lands against the stated target.

Peer Cohorts (Per Segment, With Filing Citations)

FSS United States (reported)

FSS International (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.

Sources

Q2 FY2026 results, May 2026 · Q2 FY2026 outlook, May 2026 · company announcement, 2026

View the full interactive ARMK report on boothcheck