When Should You Buy Aramark (NYSE:ARMK)?

Let’s talk about the popular Aramark (NYSE:ARMK). The company’s shares led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Aramark’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Aramark

What’s The Opportunity In Aramark?

According to my valuation model, Aramark seems to be fairly priced at around 0.9% below my intrinsic value, which means if you buy Aramark today, you’d be paying a fair price for it. And if you believe that the stock is really worth $45.17, then there isn’t much room for the share price to grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Aramark’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Aramark look like?

earnings and revenue growth
NYSE:ARMK Earnings and Revenue Growth January 25th 2023

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to be more than double over the next couple of years, the future seems bright for Aramark. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in ARMK’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on ARMK, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you’d like to do more analysis on the company, it’s vital to be informed of the risks involved. You’d be interested to know, that we found 1 warning sign for Aramark and you’ll want to know about it.

If you are no longer interested in Aramark, you can use our free platform to see our list of about 50 other stocks with a high growth potential.

What are the risks and opportunities for Arabmark?

Aramark provides food, facilities, and uniform services to education, healthcare, business and industry, sports, leisure, and corrections clients in the United States and internationally.

View Full Analysis

Rewards

  • Trading at 1% below our estimate of its fair value

  • Earnings are forecast to grow 31.66% per year

  • Became profitable this year

Risks

  • Interest payments are not well covered by earnings

View all Risks and Rewards

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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