ABM Industries Incorporated (ABM): A Bull Case Theory

We came across a bullish thesis on ABM Industries Incorporated on Valueinvestorsclub.com by thecoyelf. In this article, we will summarize the bulls’ thesis on ABM. ABM Industries Incorporated's share was trading at $47.51 as of July 21^st. ABM’s trailing and forward P/E were 38.01 and 11.3 respectively according to Yahoo Finance.

ABM Industries (ABM), the largest U.S. provider of janitorial services, derives ~60% of its revenue from its core janitorial business and the remainder from complementary services, including facilities, parking management, and the growing Technical Solutions segment. This diversification allows ABM to serve a broad customer base spanning commercial real estate, manufacturing, data centers, hospitals, airports, schools, and sports arenas.

Management is concluding a $200 mn ERP investment cycle that has temporarily depressed free cash flow; three of five business units are now integrated, with efficiency and margin gains expected as the system centralizes data and streamlines operations. ABM’s Technical Solutions business (~10% of revenue) is a key growth driver, backed by acquisitions like RavenVolt (microgrids) and Quality Uptime (data center battery services), with >30,000 EV charging ports installed and a proprietary EV OS for remote monitoring.

Margins in this segment are comparable to or better than the legacy business, and cross-selling opportunities offer further upside. Aviation and Technical Solutions (~20% of revenue) are growing 10–15%, offsetting flat trends in other segments, with tailwinds from U.S. manufacturing reshoring and businesses reducing work-from-home arrangements. ABM’s flexible labor-heavy cost base provides strong downside protection, with scope for EBITDA margin expansion to ~7% as ERP benefits and scale efficiencies take hold.

Management projects revenue growth of 3–4% through 2029, with EBITDA of approximately $675 million and FCF of approximately $400 million, accompanied by significant capital returns. Trading at ~9.5 times NTM EV/EBITDA, ABM offers a defensive, cash-generative profile with catalysts including a free cash flow inflection post-ERP and continued growth in Technical Solutions, supporting ~19% IRR potential.

Previously, we covered a bullish thesis on ABM Industries Incorporated by Stock Analysis Compilation in November 2024, which highlighted steady GDP-like revenue growth, resilience in downturns, and upside from microgrid and EV infrastructure expansion. The company’s stock price has depreciated by about 14% since our coverage as tailwinds were delayed. thecoyelf shares a similar view but emphasizes ERP-driven free cash flow inflection and Technical Solutions growth.

ABM Industries Incorporated is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 20 hedge fund portfolios held ABM at the end of the first quarter which was 14 in the previous quarter. While we acknowledge the potential of ABM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.