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Investing.com - Stifel has reiterated its Buy rating and $49.00 price target on Aramark Holdings (NYSE:ARMK), citing increased confidence in the company’s growth trajectory. Currently trading at $38.16, InvestingPro analysis indicates the stock is slightly undervalued, with a GOOD financial health score of 2.52.
The investment firm expressed optimism about Aramark’s ability to deliver annual organic topline growth of 5% to 8%, with 4% to 5% coming from net new business, which should drive sustainable margin expansion. This aligns with InvestingPro data showing a projected 7% revenue growth for FY2025, though current gross profit margins remain at 15.56%.
Stifel expects the EV/EBITDA valuation gap between Aramark and competitor Compass to narrow or close as the company establishes this growth track record, based on strong new business wins and continued elevated levels of retention.
While FY25 organic revenue guidance implies a significant ramp in the fourth quarter of fiscal 2025, Stifel believes several factors make this step-up achievable, though specific details were not provided in the context.
The firm also highlighted an opportunity for continued capital return to investors as Aramark is projected to reach 2.5x leverage at the end of fiscal year 2026.
In other recent news, Aramark has refinanced $730 million in term loans, extending the maturity to April 2028. This refinancing was part of an amendment to its existing credit agreement with JPMorgan Chase Bank and other financial institutions. Additionally, Aramark completed the repricing of its 2028 Term Loan B, reducing the interest rate by 25 basis points, which is expected to yield annual interest expense savings. Despite softer revenue and margin results in the fiscal third quarter of 2025, several analysts have shown optimism about Aramark’s future prospects. Stifel maintained its Buy rating with a price target of $49, citing solid growth potential. Baird upgraded Aramark from Neutral to Outperform, raising its price target to $47, highlighting a "longer-term opportunity" after the company’s recent results. UBS also increased its price target to $46, maintaining a Buy rating, despite noting consecutive quarters of missed organic growth targets. These developments reflect ongoing analyst confidence in Aramark’s growth potential.
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