Aramark’s 22% return over the past six months has outpaced the S&P 500 by 17.2%, and its stock price has climbed to $54.62 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy ARMK? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why is Aramark a good business?
From serving hot dogs at major league stadiums to managing college dining halls that feed thousands daily, Aramark (NYSE: ARMK) provides food services and facilities management to schools, healthcare facilities, businesses, sports venues, and correctional institutions across 16 countries.
1. Skyrocketing revenue shows strong momentum
A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Aramark’s 12% annualized revenue growth over the last five years was excellent. Its growth surpassed the average business services company and shows its offerings resonate with customers.
2. Economies of scale give it negotiating leverage with suppliers
With $19.85 billion in revenue over the past 12 months, Aramark is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices.
3. Outstanding long-term EPS growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Aramark’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.
Final judgment
These are just a few reasons why we think Aramark is a high-quality business, and with its shares topping the market in recent months, the stock trades at 20.6× forward P/E (or $54.62 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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