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

While Aramark (NYSE:ARMK) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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 we will analyse the most recent data on Aramark’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Aramark

What's The Opportunity In Aramark?

Aramark appears to be overvalued by 32% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$28.96 on the market compared to our intrinsic value of $21.93. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Aramark’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Aramark look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -18% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Aramark. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? If you believe ARMK is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ARMK for a while, now may not be the best time to enter into the stock. you may want to reconsider buying the stock at this time. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?

If you want to dive deeper into Aramark, you'd also look into what risks it is currently facing. For example, Aramark has 3 warning signs (and 2 which are a bit concerning) we think you should know about.

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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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.