NYSE: ARMK

Introduction:

Aramark is an American food service, facilities, and uniform services provider to clients in fields including education, healthcare, business, corrections, and leisure. Its current stock price as of April 2018 is $38.32 with a market cap of $9.42B.

Recommendation:

Long, with a price target of $47.10.

Summary:

Aramark has a strong and growing client base because of client loyalty and continual referrals. It faces risks common to the industry, such as litigation, regulation, and growing labor costs. However, these risks are not higher compared to other comparable companies, and Aramark’s established reputation and well-known clients will contribute to its further growth. 

Aramark’s recent acquisitions of Avendera and AmeriPride, as well as its technological strides with AI checkout machines and ordering, will help it streamline its process and increase sales growth. Moreover, the recent passage of tax reform legislation significantly benefits Aramark, and it will use the majority of its cash tax savings to accelerate deleveraging. All of these factors make Aramark currently undervalued.