ARKO Corp. (ARKO) stock intrinsic value fair value estimate & owner earnings analysis

ARKO Corp operates GPM Investments, a large chain of convenience stores and gas stations across the Mid-Atlantic, Northeast, Midwest and South, together with a wholesale fuel-supply business, a fleet-fueling card network, and a fuel-logistics unit that supplies fuel to its own sites and to outside dealers. A significant structural change just occurred. In February 2026, ARKO took its wholesale, fleet-fueling and fuel-logistics operations public as a separate company (ARKO Petroleum Corp, "APC"), selling roughly a quarter of the economic interest to outside investors for about $183 million, which was used to pay down debt. ARKO still controls and consolidates APC, but outside shareholders now share in that part of the business's profit going forward. Those operations have generated close to half of the company's total segment profit in recent years, so this change permanently reduces the share of future profit that flows to ARKO's own shareholders, even though it also lowered debt by a similar amount. Separately, ARKO has been running a multi-year "Transformation Plan" since mid-2024 that converts a meaningful number of company-run convenience stores into dealer-operated locations supplied by the wholesale business, alongside store remodels and new locations. This shifts sales and profit from the fully-owned retail segment toward the wholesale segment that outside investors now partly own. Same-store merchandise sales fell 4.1% in 2025 versus 2024, continuing a multi-year decline in reported cash flow from a 2022 peak, when unusually volatile fuel prices widened industry-wide fuel margins. Cash flow in the first half of 2026 continued that decline. Fuel margin per gallon actually improved in 2025 versus 2024, but because these margins are driven by short-term swings in wholesale fuel prices and move in both directions with little warning, we have not assumed the improvement continues. We valued the cash the business generates after the real, ongoing cost of keeping the stores running (site upkeep and equipment, as distinct from money spent on new stores or acquisitions), before interest payments, discounted that at a flat rate, and then subtracted what the company owes, net of cash, to arrive at a per-share value. Net debt was approximately $624 million as of the most recent balance sheet, down from about $814 million six months earlier, reflecting the paydown funded by the February 2026 transaction described above. Base case: the recent pace of same-store softness continues into 2026, then gradually levels off into a flat, sustained level of cash flow that we expect the store network to keep generating indefinitely, since people will keep buying fuel and convenience items even without further growth. This produces a value of about $4.41 per share. Bull case: the fuel-margin improvement already achieved in 2025 holds up, and the store remodels and dealer conversions succeed in stabilizing same-store sales within a couple of years, without further deterioration. This produces a value of about $5.95 per share. Bear case: same-store softness continues without leveling off, and the recent fuel-margin improvement gives back its gains. In this scenario the business's cash flow before interest would fall short of covering ARKO's interest payments for an extended stretch, which lenders would not simply allow to continue. In practice that would likely force further asset sales, another partial sale of a business unit, or a dilutive refinancing, leaving little for existing shareholders. We have valued this case at roughly $0.30 per share to reflect that risk, well below what a simple mechanical projection alone would show. The business is complex: four operating segments, a partly-public subsidiary with its own outside shareholders, and several real-estate financing arrangements, including sale-leaseback transactions (one of which produced a one-time $20.8 million gain in 2025 tied to a 2021 acquisition). Given how far the bear case falls versus the base case, the margin-of-safety price is set well below our base-case estimate, at roughly $2.25 per share, and it assumes the same-store sales trend stabilizes (flat to positive) for a couple of consecutive quarters.