Stock Analysis

Is There Now An Opportunity In Aramark (NYSE:ARMK)?

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NYSE:ARMK
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Aramark (NYSE:ARMK), is not the largest company out there, but it saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Aramark’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Aramark

Is Aramark still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 6.4% below my intrinsic value, which means if you buy Aramark today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $39.09, then there isn’t much room for the share price 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.

Can we expect growth from Aramark?

earnings-and-revenue-growth
NYSE:ARMK Earnings and Revenue Growth October 11th 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 revenues expected to grow by 52% over the next couple of years, the future seems bright for Aramark. If the level of expenses is able to be maintained, 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 conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on ARMK, now may not be the most advantageous 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Aramark has 1 warning sign and it would be unwise to ignore it.

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

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