The latest earnings update Aramark (NYSE:ARMK) released in September 2018 revealed that the company experienced a large tailwind, eventuating to a high double-digit earnings growth of 52%. Below, I’ve laid out key numbers on how market analysts view Aramark’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Analysts’ expectations for next year seems pessimistic, with earnings falling by a double-digit -14%. However, the next few years show a contrast, with earnings growth becoming positive in 2020, with the bottom line increasing to US$747m in 2021.
While it’s useful to be aware of the growth each year relative to today’s level, it may be more beneficial evaluating the rate at which the earnings are moving every year, on average. The advantage of this technique is that we can get a bigger picture of the direction of Aramark’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I’ve inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 4.6%. This means that, we can anticipate Aramark will grow its earnings by 4.6% every year for the next couple of years.
For Aramark, I’ve put together three pertinent factors you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is ARMK worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ARMK is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ARMK? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.