Aramark (ARMK) stock intrinsic value fair value estimate & owner earnings analysis

Aramark runs cafeterias, concessions and facility services under multi-year contracts for universities, hospitals, stadiums, corrections facilities and corporate campuses. In fiscal 2025 it booked $18.5 billion of revenue, 71% in the United States and 29% abroad, and no single client (other than U.S. government agencies collectively) exceeds 2% of sales. In late 2023 it spun off its uniform business, so we measure the company only from fiscal 2022 onward; the years before describe a different, larger business and are recorded for reference only. How we measure earnings. We start from operating cash flow, strip out swings in receivables, inventories, payables and accruals, subtract stock compensation as a real cost, and subtract only the capital spending needed to stand still (spending tied to revenue growth is treated as discretionary). Payments Aramark makes to clients to win or keep contracts ($123 million in fiscal 2025) are treated as a recurring cost of doing business. On that basis, per-share owner earnings were about $0.49 in fiscal 2022, $0.50 in 2023, $0.96 in 2024 and $1.30 in 2025. The 2020 and 2021 pandemic years were negative on this basis, which shows how exposed the model is to events, sports and office closures. Our starting level is $0.96, the median of fiscal 2023 to 2025, a period after the spin-off and after pandemic disruption. The most recent year's $1.30 is higher, and it benefited from a 53rd week (roughly 1% of revenue), so we do not treat it as the norm. Amortization of acquired intangibles is a non-cash charge that is added back automatically; Aramark's steady bolt-on acquisitions are in the growth assumptions below, not in a lower earnings level. Growth check. Owner earnings grew about 36% in fiscal 2025. For year one of the base case we assume 10% growth from our $0.96 starting level, to about $1.06, still below the $1.30 already earned in fiscal 2025. The reason is in the filings: through the first nine months of fiscal 2026 (10-Q filed August 2026) revenue was up 10.0% to $14.8 billion and net income up 24% to $296 million, so most of that year is already reported. After year one we credit only 3% a year, which is at or below the roughly 3% annual revenue growth Aramark achieved in the four years before the pandemic. Margin expansion, share gains, new markets and management targets are left out because they are not yet in hand. Base case, about $21.60 per share. Owner earnings rise to about $1.06 in year one and then grow 3% a year to about $1.38 in year ten. Beyond year ten we hold that level flat rather than adding growth. The business rests on a demonstrated multi-decade contract model with a very diversified client base, so we credit continued earnings but no further growth. Bear case, about $12.10 per share. Aramark carries about $5.4 billion of debt, with roughly $1.9 billion due in fiscal 2028 and $2.4 billion in fiscal 2030, and interest of $342 million absorbed nearly all of fiscal 2025 owner earnings. The fiscal 2020 and 2021 pandemic experience shows how quickly cash flow can disappear when venues and offices close. This case assumes owner earnings of $0.85 in years one and two, two years of essentially zero owner earnings from a comparable disruption, and then a permanently lower $0.80 level because refinancing costs more and some clients are lost. No further growth is assumed. Bull case, about $30.90 per share. Aramark simply keeps doing what it has been doing. Fiscal 2026 owner earnings reach about $1.41, which builds on the $1.30 already earned in fiscal 2025 and the 24% net income growth in the first nine months of fiscal 2026. It then grows 4% a year for ten years, a pace slightly above pre-pandemic revenue growth that reflects net new business and price increases the company has reported, and holds flat thereafter. What we tried to break. The 3% growth credit depends on contracts continuing to renew. The 10-K does not give a client retention rate, so we could not confirm renewal rates directly. We rely instead on the sixteen-country footprint, no client above 2% of revenue, and three straight years of revenue growth driven by base business and net new business. The filing also notes that some clients prefer a limited number of preferred vendors, which could raise competitive pressure and is one reason the bear case exists. We did not subtract debt from the value because the cash flows we use are already after interest; instead, leverage is reflected in the bear case. What would make this wrong. A recession or event closure that repeats the pandemic pattern, refinancing at materially higher rates, or loss of large university or healthcare contracts would push results toward the bear case. Numbers we could not reconcile: prior-year revenue on the recast continuing-business basis was not available for fiscal 2022, so we treated that year's capital spending as entirely maintenance (a slightly conservative choice). The margin-of-safety price is about $11 per share, roughly the bear-case value and about half the base value, given the leverage and demonstrated pandemic sensitivity.