Aramark (ARMK): A Bull Case Theory

We came across a bullish thesis on Aramark on X.com by longonlybets. In this article, we will summarize the bulls’ thesis on ARMK. Aramark's share was trading at $38.45 as of September 9th. ARMK’s trailing and forward P/E were 28.27 and 17.54 respectively according to Yahoo Finance.

Aramark (ARMK) represents a quality contract catering business with improving fundamentals and attractive growth potential, trading at a reasonable multiple relative to peers. The company operates in 15 countries, with the U.S. accounting for roughly 75% of revenue, and holds the #2 market share domestically and #3 in most international markets behind CPG and Sodexo. Following the spin-off of Vestis Corp in September 2023, ARMK is now a pure-play contract catering company, with 84% of revenue from food service and the remainder from support services.

Its business model benefits from recurring, predictable revenue, high cash conversion, limited working capital requirements, and modest capex of 3–4% of revenue. Contracts generally extend beyond one year, and two-thirds are performance-based P&L agreements, giving the company flexibility to capture margin improvements. ARMK faces challenges including exposure to labor inflation and food costs, low operating leverage potential, and relatively high leverage. Net debt including leases stands at $6.1 billion, or 4.2x LTM EBITDA, expected to decline to ~3x by September 2025.

Management under CEO John Zillmer has invested in automation, supply chain, and internal systems, while focusing on profit capture and operational efficiencies. Recent results demonstrate strong execution, with record base business volumes, new business wins, retention, and corporate cost control. Q2 and Q3 performance showed robust profitability and guidance suggests full-year organic growth of 5.5–7.5%, with Q4 expected to ramp above 8% after lapping prior-year contract exits.

The company has the potential for mid- to high-single-digit organic revenue growth and over 10% EPS growth. Trading at ~18x earnings, ARMK could re-rate closer to peer CPG’s ~25x if business quality continues to improve, highlighting a compelling risk/reward profile for investors focused on operational improvement and growth execution.

Previously we covered a bearish thesis on Restaurant Brands International (QSR) by Monopolistic Investor in January 2025, which highlighted the company’s weak profit margins, sluggish revenue growth, and heavy leverage position. The company’s stock price has depreciated approximately by 0.8% since our coverage. This is because the thesis partially played out with stagnant financial performance and limited competitive advantage. QSR’s structural debt and margin issues remain unresolved. The current thesis by Longonlybets highlights a different business model within the same broad food service industry, offering investors a contrasting risk-reward profile. The author emphasizes on Aramark’s stronger fundamentals, recurring revenue base, and potential for multiple re-rating.

Aramark is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held ARMK at the end of the first quarter which was 31 in the previous quarter. While we acknowledge the potential of ARMK 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.