Aramark Common Stock (ARMK)

FairStock Score: 34/100 — RISKY

Key Financials

Strengths

• Generates $190 million in annual free cash flow (1.6% yield on market cap)
• Solid return on equity of 10.0% above cost of capital
• Established organization with 2,78,390 employees providing operational scale

Concerns

• Trades significantly above Graham Number ($18) with negative 155% margin of safety—limited downside protection
• High leverage at 2.03x debt-to-equity increases financial risk and interest expense burden
• Altman Z-Score of 1.2 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

Aramark Common Stock is a mid-cap industrials company valued at $12.1 billion. The business generates $18.8 billion in annual revenue with a 0.5% net margin and $190 million in free cash flow. From a quality standpoint, Aramark shows distressed Altman Z-Score of 1.2 warrants caution and adequate 10% ROE. On valuation, the stock is trading at a premium 38.8x earnings, with trades far above its Graham Number ($18) with no margin of safety. Growth dynamics show revenue growing at 6.1% and profit growth of -8.9%. The 1.1% dividend yield adds an income component for patient holders. Our composite FairStock Score of 34/100 reflects below-average fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Improving fundamentals and sector tailwinds could drive meaningful earnings growth, compressing the effective multiple for patient investors. With $190 million in annual free cash flow (1.6% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

At 39x earnings, any growth disappointment triggers rapid multiple compression—a 20% earnings miss plus multiple contraction to 20x implies 40%+ downside. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer