-$0.80
$4.67
bear -$0.80
base $2.01
bull $4.67
margin of safety $1.20
market price* $13.88
Business condition attached to the margin of safety
Fiscal 2026 full-year results confirm the cost-savings step-up is holding (cash earnings before interest at or above roughly $135 million a year) and the receivables securitization facility (ends August 2027) and the Term Loan A-2 (due September 2028) are extended without further covenant relief.
Vestis rents and launders work uniforms, floor mats, towels, restroom and first-aid supplies to roughly 300,000 customer accounts across the United States and Canada (Canada is the smaller of its two segments). It was spun out of Aramark on September 30, 2023, so it has only about two years of standalone history. Revenue has slipped since: $2.81 billion in fiscal 2024 and $2.73 billion in fiscal 2025 (a 53-week year), and about 1.9% lower again over the first nine months of fiscal 2026. The company says customer retention is the problem it is trying to fix. HOW WE MEASURED EARNINGS. We measure what the business really leaves for owners: operating cash flow, minus swings in receivables, inventory and payables, minus stock compensation, minus the equipment and vehicles needed just to stay in business. Vestis buys much of its delivery fleet through finance leases, whose payments do not appear as capital spending, so we count those lease payments ($34.5 million in fiscal 2025) as spending required to keep operating rather than ignoring them. Fiscal 2024 operating cash flow of $472 million was inflated by a one-time $216 million receivables inflow from a new receivables-sale program, which we removed. On this basis owner earnings after interest were about $17.6 million in fiscal 2024 and $7.8 million in fiscal 2025. Fiscal 2022 and 2023 look much higher ($210 million and $202 million) but describe a subsidiary of Aramark with no third-party debt and no stand-alone costs, so we do not use them to judge the business today. Because the company is heavily indebted, we value the business before its lenders and then subtract what it owes. Adding back cash interest on its term loans ($96.8 million in fiscal 2024, $93.6 million in fiscal 2025) and the fees on the receivables-sale program ($1.7 million and $13.0 million) gives business cash flow of about $116 million and $114 million. We use the midpoint, about $115 million a year, as the earnings level. That is deliberately not the more recent, better-looking nine months, which we treat as too short to reset the level for the base case. WHAT IT OWES. Term loans and the revolver were about $1.10 billion of principal after paying down roughly $71 million in the first nine months of fiscal 2026 (Term Loan A-2 due September 2028, Term Loan B-1 due February 2031). We also treat the $202.5 million of receivables sold to banks under the August 2024 facility, which ends in August 2027, as borrowing, because it must be replaced with cash if the facility is not renewed. Less about $28 million of cash above operating needs, net debt is roughly $1.27 billion, or about $9.47 per share. The lenders' leverage limit was loosened in 2025 and tightens again to 4.75 times at October 2026 and 4.50 times after that; dividends and buybacks are barred until then. That leaves little room for a weaker year. BASE CASE, about $2.01 per share. The business produces about $115 million a year and holds it flat for ten years, then slowly shrinks 3% a year, in line with the recent revenue decline. Business value is about $1.54 billion against $1.27 billion of debt, leaving about $270 million for shareholders. Growth credited: none. Year-one growth is 0%, versus a fiscal 2025 decline of about 1.5% in business cash flow; the reason we do not extend that decline is the company's own nine-month fiscal 2026 report (filed August 2026), which shows net income of $7.3 million against a $27.7 million loss a year earlier, and cash interest of $55.7 million against $64.7 million. Left out: management's target of at least $75 million of annual cost savings from the restructuring plan launched in fiscal 2026 and any return to revenue growth, because neither is secured yet. BEAR CASE, about -$0.80 per share. Customer losses continue, cash earnings shrink 3% a year starting from $115 million, and the giveback of recent improvements is complete. Lenders charge about 1.5 percentage points more when the 2027 receivables facility and 2028 term loan are refinanced (worth about $78 million). Business value is about $1.24 billion against about $1.27 billion of debt plus the refinancing cost: the company owes roughly $110 million more than the business is worth, so nothing is left for shareholders in this case. BULL CASE, about $4.67 per share. The improvement shown in fiscal 2026 holds: nine-month results imply roughly $28 million a year more cash earnings than fiscal 2025, or about $142 million a year, held flat for ten years, then shrinking 3% a year. Business value is about $1.90 billion against $1.27 billion of debt, leaving about $630 million for shareholders. This needs no new products or markets, only that savings already showing up in reported results stay in place. WHAT COULD MAKE THIS WRONG. Because debt is about 80% of the base-case business value, a 10% change in cash earnings moves the share value by roughly $1.15. The fiscal 2026 improvement may prove larger and more durable than assumed, in which case even the bull case is too low, or customers may keep leaving faster than assumed. A number we could not fully reconcile: the nine-month fiscal 2026 report gives only summary cash-flow lines, so the comparison with prior years is approximate, and the size of the receivables program at July 2026 was assumed unchanged from October 2025. Several shareholder class-action lawsuits over 2024 disclosures are ongoing; no loss has been accrued and none is included in these figures.