Intrinsic value of Aramark - ARMK

Previous Close

$36.45

  Intrinsic Value

$45.27

stock screener

  Rating & Target

buy

+24%

Previous close

$36.45

 
Intrinsic value

$45.27

 
Up/down potential

+24%

 
Rating

buy

We calculate the intrinsic value of ARMK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 9.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
Revenue, $m
  16,990
  18,237
  19,533
  20,880
  22,280
  23,736
  25,251
  26,828
  28,469
  30,179
  31,962
  33,821
  35,760
  37,785
  39,899
  42,107
  44,415
  46,829
  49,353
  51,994
  54,758
  57,651
  60,682
  63,856
  67,181
  70,665
  74,317
  78,145
  82,159
  86,368
Variable operating expenses, $m
  15,997
  17,114
  18,275
  19,482
  20,736
  22,041
  23,398
  24,810
  26,281
  27,814
  28,636
  30,301
  32,039
  33,853
  35,747
  37,725
  39,793
  41,955
  44,217
  46,583
  49,060
  51,652
  54,367
  57,211
  60,190
  63,312
  66,583
  70,013
  73,609
  77,380
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  15,997
  17,114
  18,275
  19,482
  20,736
  22,041
  23,398
  24,810
  26,281
  27,814
  28,636
  30,301
  32,039
  33,853
  35,747
  37,725
  39,793
  41,955
  44,217
  46,583
  49,060
  51,652
  54,367
  57,211
  60,190
  63,312
  66,583
  70,013
  73,609
  77,380
Operating income, $m
  993
  1,123
  1,258
  1,398
  1,544
  1,695
  1,853
  2,017
  2,188
  2,366
  3,326
  3,519
  3,721
  3,932
  4,152
  4,382
  4,622
  4,873
  5,136
  5,411
  5,698
  5,999
  6,315
  6,645
  6,991
  7,354
  7,734
  8,132
  8,550
  8,988
EBITDA, $m
  2,138
  2,295
  2,458
  2,628
  2,804
  2,987
  3,178
  3,376
  3,583
  3,798
  4,023
  4,256
  4,501
  4,755
  5,021
  5,299
  5,590
  5,894
  6,211
  6,544
  6,891
  7,256
  7,637
  8,036
  8,455
  8,893
  9,353
  9,835
  10,340
  10,870
Interest expense (income), $m
  202
  413
  459
  507
  557
  609
  663
  719
  778
  838
  902
  968
  1,037
  1,108
  1,183
  1,261
  1,343
  1,428
  1,517
  1,610
  1,707
  1,809
  1,916
  2,028
  2,145
  2,267
  2,395
  2,530
  2,671
  2,818
  2,973
Earnings before tax, $m
  580
  664
  751
  841
  935
  1,032
  1,134
  1,239
  1,349
  1,464
  2,358
  2,483
  2,613
  2,749
  2,891
  3,039
  3,194
  3,356
  3,526
  3,703
  3,889
  4,083
  4,287
  4,500
  4,724
  4,958
  5,204
  5,461
  5,731
  6,015
Tax expense, $m
  157
  179
  203
  227
  252
  279
  306
  335
  364
  395
  637
  670
  706
  742
  781
  821
  862
  906
  952
  1,000
  1,050
  1,103
  1,158
  1,215
  1,275
  1,339
  1,405
  1,475
  1,547
  1,624
Net income, $m
  424
  485
  548
  614
  682
  754
  828
  905
  985
  1,069
  1,722
  1,813
  1,908
  2,007
  2,110
  2,218
  2,332
  2,450
  2,574
  2,703
  2,839
  2,981
  3,130
  3,285
  3,449
  3,620
  3,799
  3,987
  4,184
  4,391

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  14,761
  15,845
  16,970
  18,141
  19,357
  20,622
  21,938
  23,308
  24,734
  26,220
  27,769
  29,384
  31,069
  32,828
  34,664
  36,583
  38,588
  40,685
  42,878
  45,173
  47,574
  50,088
  52,721
  55,478
  58,367
  61,395
  64,567
  67,893
  71,381
  75,037
Adjusted assets (=assets-cash), $m
  14,761
  15,845
  16,970
  18,141
  19,357
  20,622
  21,938
  23,308
  24,734
  26,220
  27,769
  29,384
  31,069
  32,828
  34,664
  36,583
  38,588
  40,685
  42,878
  45,173
  47,574
  50,088
  52,721
  55,478
  58,367
  61,395
  64,567
  67,893
  71,381
  75,037
Revenue / Adjusted assets
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
  1.151
Average production assets, $m
  4,961
  5,325
  5,704
  6,097
  6,506
  6,931
  7,373
  7,834
  8,313
  8,812
  9,333
  9,876
  10,442
  11,033
  11,650
  12,295
  12,969
  13,674
  14,411
  15,182
  15,989
  16,834
  17,719
  18,646
  19,617
  20,634
  21,701
  22,818
  23,990
  25,219
Working capital, $m
  238
  255
  273
  292
  312
  332
  354
  376
  399
  423
  447
  473
  501
  529
  559
  589
  622
  656
  691
  728
  767
  807
  850
  894
  941
  989
  1,040
  1,094
  1,150
  1,209
Total debt, $m
  8,052
  8,896
  9,773
  10,685
  11,633
  12,618
  13,643
  14,710
  15,821
  16,979
  18,185
  19,443
  20,756
  22,126
  23,557
  25,052
  26,614
  28,247
  29,956
  31,743
  33,614
  35,572
  37,623
  39,771
  42,022
  44,380
  46,851
  49,442
  52,159
  55,007
Total liabilities, $m
  11,499
  12,343
  13,220
  14,132
  15,079
  16,065
  17,090
  18,157
  19,268
  20,425
  21,632
  22,890
  24,203
  25,573
  27,003
  28,498
  30,060
  31,694
  33,402
  35,190
  37,060
  39,019
  41,069
  43,218
  45,468
  47,826
  50,298
  52,889
  55,605
  58,454
Total equity, $m
  3,262
  3,502
  3,750
  4,009
  4,278
  4,558
  4,848
  5,151
  5,466
  5,795
  6,137
  6,494
  6,866
  7,255
  7,661
  8,085
  8,528
  8,991
  9,476
  9,983
  10,514
  11,069
  11,651
  12,261
  12,899
  13,568
  14,269
  15,004
  15,775
  16,583
Total liabilities and equity, $m
  14,761
  15,845
  16,970
  18,141
  19,357
  20,623
  21,938
  23,308
  24,734
  26,220
  27,769
  29,384
  31,069
  32,828
  34,664
  36,583
  38,588
  40,685
  42,878
  45,173
  47,574
  50,088
  52,720
  55,479
  58,367
  61,394
  64,567
  67,893
  71,380
  75,037
Debt-to-equity ratio
  2.470
  2.540
  2.610
  2.670
  2.720
  2.770
  2.810
  2.860
  2.890
  2.930
  2.960
  2.990
  3.020
  3.050
  3.070
  3.100
  3.120
  3.140
  3.160
  3.180
  3.200
  3.210
  3.230
  3.240
  3.260
  3.270
  3.280
  3.300
  3.310
  3.320
Adjusted equity ratio
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  424
  485
  548
  614
  682
  754
  828
  905
  985
  1,069
  1,722
  1,813
  1,908
  2,007
  2,110
  2,218
  2,332
  2,450
  2,574
  2,703
  2,839
  2,981
  3,130
  3,285
  3,449
  3,620
  3,799
  3,987
  4,184
  4,391
Depreciation, amort., depletion, $m
  1,145
  1,172
  1,200
  1,230
  1,260
  1,292
  1,325
  1,359
  1,395
  1,432
  696
  737
  779
  823
  869
  918
  968
  1,020
  1,075
  1,133
  1,193
  1,256
  1,322
  1,391
  1,464
  1,540
  1,619
  1,703
  1,790
  1,882
Funds from operations, $m
  1,569
  1,657
  1,748
  1,844
  1,943
  2,046
  2,153
  2,264
  2,380
  2,501
  2,418
  2,550
  2,687
  2,830
  2,980
  3,136
  3,299
  3,470
  3,649
  3,836
  4,032
  4,237
  4,452
  4,677
  4,913
  5,159
  5,418
  5,690
  5,974
  6,273
Change in working capital, $m
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  42
  44
  47
  49
  51
  54
  56
  59
Cash from operations, $m
  1,552
  1,639
  1,730
  1,825
  1,923
  2,025
  2,131
  2,242
  2,357
  2,477
  2,393
  2,523
  2,660
  2,802
  2,950
  3,105
  3,267
  3,437
  3,614
  3,799
  3,993
  4,197
  4,409
  4,632
  4,866
  5,111
  5,367
  5,636
  5,918
  6,214
Maintenance CAPEX, $m
  -344
  -370
  -397
  -426
  -455
  -486
  -517
  -550
  -585
  -620
  -658
  -696
  -737
  -779
  -823
  -869
  -918
  -968
  -1,020
  -1,075
  -1,133
  -1,193
  -1,256
  -1,322
  -1,391
  -1,464
  -1,540
  -1,619
  -1,703
  -1,790
New CAPEX, $m
  -355
  -364
  -378
  -393
  -409
  -425
  -442
  -460
  -479
  -499
  -521
  -543
  -566
  -591
  -617
  -645
  -674
  -705
  -737
  -771
  -807
  -845
  -885
  -927
  -971
  -1,017
  -1,066
  -1,118
  -1,172
  -1,229
Cash from investing activities, $m
  -699
  -734
  -775
  -819
  -864
  -911
  -959
  -1,010
  -1,064
  -1,119
  -1,179
  -1,239
  -1,303
  -1,370
  -1,440
  -1,514
  -1,592
  -1,673
  -1,757
  -1,846
  -1,940
  -2,038
  -2,141
  -2,249
  -2,362
  -2,481
  -2,606
  -2,737
  -2,875
  -3,019
Free cash flow, $m
  853
  905
  955
  1,006
  1,059
  1,114
  1,172
  1,231
  1,293
  1,357
  1,215
  1,284
  1,356
  1,431
  1,509
  1,591
  1,676
  1,764
  1,856
  1,953
  2,053
  2,158
  2,268
  2,383
  2,504
  2,629
  2,761
  2,899
  3,043
  3,195
Issuance/(repayment) of debt, $m
  808
  844
  877
  912
  948
  985
  1,025
  1,067
  1,111
  1,157
  1,206
  1,258
  1,313
  1,370
  1,431
  1,495
  1,562
  1,633
  1,708
  1,787
  1,871
  1,958
  2,051
  2,148
  2,251
  2,358
  2,472
  2,591
  2,716
  2,848
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  808
  844
  877
  912
  948
  985
  1,025
  1,067
  1,111
  1,157
  1,206
  1,258
  1,313
  1,370
  1,431
  1,495
  1,562
  1,633
  1,708
  1,787
  1,871
  1,958
  2,051
  2,148
  2,251
  2,358
  2,472
  2,591
  2,716
  2,848
Total cash flow (excl. dividends), $m
  1,661
  1,749
  1,832
  1,917
  2,007
  2,100
  2,197
  2,298
  2,404
  2,515
  2,421
  2,542
  2,669
  2,801
  2,940
  3,086
  3,238
  3,397
  3,565
  3,740
  3,924
  4,117
  4,319
  4,531
  4,754
  4,988
  5,233
  5,490
  5,760
  6,043
Retained Cash Flow (-), $m
  -233
  -239
  -249
  -259
  -269
  -280
  -291
  -303
  -315
  -328
  -342
  -357
  -372
  -389
  -406
  -424
  -443
  -463
  -485
  -507
  -531
  -556
  -582
  -609
  -638
  -669
  -701
  -735
  -771
  -808
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  1,429
  1,510
  1,583
  1,659
  1,738
  1,820
  1,906
  1,996
  2,089
  2,186
  2,079
  2,185
  2,297
  2,413
  2,534
  2,661
  2,795
  2,934
  3,080
  3,233
  3,393
  3,561
  3,737
  3,922
  4,116
  4,319
  4,531
  4,755
  4,989
  5,235
Discount rate, %
  9.90
  10.40
  10.91
  11.46
  12.03
  12.64
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.83
  25.02
  26.27
  27.58
  28.96
  30.41
  31.93
  33.52
  35.20
  36.96
  38.81
  40.75
PV of cash for distribution, $m
  1,300
  1,239
  1,160
  1,075
  985
  891
  797
  703
  611
  524
  401
  334
  274
  220
  173
  133
  100
  74
  53
  37
  25
  17
  11
  7
  4
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Aramark is a global provider of food, facilities and uniform services to education, healthcare, business and industry, and sports, leisure and corrections clients. The Company operates through three segments: Food and Support Services North America (FSS North America), Food and Support Services International (FSS International), and Uniform and Career Apparel (Uniform). FSS North America and FSS International segments include food, refreshment, specialized dietary and support services, including facility maintenance and housekeeping, provided to business, educational and healthcare institutions and in sports, leisure and other facilities. The Uniform segment includes rental, sale, cleaning, maintenance and delivery of personalized uniforms and other textile items to clients in a range of industries in the United States, Puerto Rico, Japan and Canada, including manufacturing, transportation, construction, restaurants and hotels, healthcare and pharmaceutical industries.

FINANCIAL RATIOS  of  Aramark (ARMK)

Valuation Ratios
P/E Ratio 23.9
Price to Sales 0.6
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow 17.9
Growth Rates
Sales Growth Rate 1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.8%
Cap. Spend. - 3 Yr. Gr. Rate 0.3%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 211.1%
Total Debt to Equity 214.2%
Interest Coverage 4
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 4.9%
Ret/ On T. Cap. - 3 Yr. Avg. 4.1%
Return On Equity 16.2%
Return On Equity - 3 Yr. Avg. 14.5%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 11.1%
Gross Margin - 3 Yr. Avg. 10.6%
EBITDA Margin 8.4%
EBITDA Margin - 3 Yr. Avg. 8.2%
Operating Margin 5.5%
Oper. Margin - 3 Yr. Avg. 5%
Pre-Tax Margin 3.6%
Pre-Tax Margin - 3 Yr. Avg. 3%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 2.1%
Effective Tax Rate 28.2%
Eff/ Tax Rate - 3 Yr. Avg. 30.7%
Payout Ratio 27%

ARMK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ARMK stock intrinsic value calculation we used $15790 million for the last fiscal year's total revenue generated by Aramark. The default revenue input number comes from 0001 income statement of Aramark. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ARMK stock valuation model: a) initial revenue growth rate of 7.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.9%, whose default value for ARMK is calculated based on our internal credit rating of Aramark, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Aramark.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ARMK stock the variable cost ratio is equal to 94.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ARMK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.7% for Aramark.

Corporate tax rate of 27% is the nominal tax rate for Aramark. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ARMK stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ARMK are equal to 29.2%.

Life of production assets of 13.4 years is the average useful life of capital assets used in Aramark operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ARMK is equal to 1.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3029.558 million for Aramark - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 246.401 million for Aramark is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Aramark at the current share price and the inputted number of shares is $9.0 billion.

RELATED COMPANIES Price Int.Val. Rating
CTAS Cintas Corpora 242.44 106.99  sell
ABM ABM Industries 41.19 44.44  buy

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.