# Aramark (ARMK) — Financial Analysis

**Exchange:**   
**Coverage as of:** 2026-Q2  
**Updated:** 2026-06-10  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/ARMK/thesis · /stocks/ARMK/memo

## Financial Snapshot

---
source: coverage-next-full
ticker: ARMK
company: Aramark
step: 04
title: Financial Quality & Adversarial Sweep
created: 2026-06-09
---

### Step 04 — Financial Quality & Adversarial Sweep: ARMK (Aramark)

#### 1. Statement Quality Adjustments

##### Key Adjustments Required for Clean Analysis

| Item | Reported | Adjusted | Notes |
|------|----------|---------|-------|
| Net Income FY2023 | $674M total | $448M cont. ops | Must use continuing operations to exclude Vestis disc. ops |
| Net Income FY2022 | $194M total | $39M cont. ops | Vestis was ~$155M of FY2022 net income |
| Revenue FY2022–2023 | Pre-spin total | Cont. ops only | Vestis contributed ~$2.7–2.8B/year pre-spin |
| FY2025 revenue | $18.5B | $18.0B organic | ~2% = 53rd week contribution (one-time) |
| Adjusted EPS (Street) | $1.82 (FY2025) | $1.22 GAAP | Street "Adjusted EPS" adds back amortization ~$0.60/share; GAAP is the conservative base |

**Analyst-adjusted EPS vs GAAP:** Aramark management and analysts use an "Adjusted EPS" metric that excludes amortization of acquired intangibles (~$0.55–0.65/share) and certain one-time items. This is common in M&A-heavy services companies. GAAP EPS $1.22 vs Adjusted EPS $1.82 in FY2025. The gap is entirely explainable by amortization — not a quality concern, but must be applied consistently when using peer multiples.

##### Non-Cash Items to Monitor [S1]

| Item | FY2025 | Commentary |
|------|--------|-----------|
| D&A | $476.4M | 2.6% of revenue; large relative to GAAP earnings; goodwill amortization significant |
| SBC | ~$75–80M (est.) | Not separately disclosed in XBRL summary; in proxy compensation data; low relative to revenue |
| Goodwill | $4,874.7M | ~26% of total assets; largest single balance sheet item; impairment risk if growth slows |
| Intangibles (net) | $1,874.1M | Customer relationships, trade names from acquisitions |

##### Working Capital Seasonality [S1]

Aramark's cash flows are highly seasonal:
- **Q1 (Oct–Dec):** Large working capital build as new academic year/sports season begins; operating CF negative in some years
- **Q3–Q4 (Apr–Sep):** Working capital release; OCF strongest
- Full-year OCF $921M (FY2025) driven by Q3-Q4 release; misleading to annualize any single quarter

#### 2. Financial Quality Scorecard

| Dimension | Score | Notes |
|-----------|-------|-------|
| Revenue recognition | Clean | Service contracts; no complex variable consideration issues flagged |
| Earnings quality (OCF/NI) | Good | OCF $921M vs NI $327M = 2.8x; strong conversion confirms earnings quality |
| Free cash flow generation | Improving | $432M FCF in FY2025 up from $299M (FY2024) and $128M (FY2023) — clear upward trajectory |
| Balance sheet quality | Moderate | $4.9B goodwill + $1.9B intangibles = 51% of total assets intangible; elevated leverage |
| Debt structure | Improving | Proactive refinancing removes near-term maturities; ~$2.4B liquidity buffer |
| Revenue comparability | Requires adjustment | Pre/post Vestis spin requires continuing-ops normalization |
| Segment disclosure | Good | FY2025 10-K discloses US sub-sector revenue breakdown in detail |

#### 3. Adversarial Research Sweep [S2][S3]

**Note: This research is based on filings, press releases, and publicly available litigation data. No earnings call transcript analysis was performed (coverage-next-full path).**

##### Short Interest & Bearish Arguments
- Short interest: ~9.71M shares (3.69% of float) — elevated but not extreme [S2]
- No active short campaigns or major investigative reports identified
- Bear thesis focuses on: (1) margin ceiling relative to Compass Group, (2) leverage, (3) labor cost inflation sustainability

##### Legal / Regulatory Investigations
- No SEC formal investigations identified in filing inventory
- Standard litigation disclosures in 10-K: employment disputes, commercial contract disagreements — no material items flagged by management
- Food safety incidents: No systemic food safety recalls or FDA enforcement actions found in public record

##### Accounting / Audit Concerns
- Auditor: Deloitte & Touche LLP (consistent; no auditor change flagged)
- Going concern: Not flagged
- Internal controls: Material weakness? None found in FY2022–FY2025 10-K disclosures
- Revenue recognition: No restatements; no SEC comment letters related to revenue methodology in recent filings (3-year look-back)

##### Governance / Activist Concerns
- No active activist campaigns identified
- Board declassified (annual elections) — positive governance signal
- CEO succession note: $5M retention RSU awarded to CEO Zillmer in FY2025 with explicit succession context — suggests transition planning underway but no near-term leadership risk [S3]

##### Key Creditor Risk (Leverage)
- Interest coverage 2.48x (TTM) [S2] — thin but improving as EBITDA grows
- Debt/EBITDA TTM ~4.5x (declining; management targeting ≤3.0x which was achieved in FY2025 per guidance)
- Most near-term maturities refinanced in FY2025 — next major maturity wall manageable
- **Key risk:** A revenue decline of 10%+ or margin compression back to FY2021 levels (~1.6% operating margin) would pressure covenant ratios. COVID scenario (FY2020: revenues fell 21%) is the tail risk.

##### Supplier Concentration Risk [S1]
- Sysco provides ~45% of US and Canada food distribution for Aramark — disclosed in 10-K risk factors
- Single-supplier concentration for nearly half of food supply is a real operational risk
- Partially mitigated by: Aramark's purchasing scale (favorable pricing leverage), Sysco's financial stability, national distribution reach

#### 4. FCF Quality & Sustainability [S1][S2]

| Year | OCF | CapEx | FCF | FCF Margin |
|------|-----|-------|-----|-----------|
| FY2021 | ~$450M | ~$280M | ~$170M | 1.4% |
| FY2022 | ~$600M | ~$350M | ~$250M | 1.8% |
| FY2023 | ~$450M | ~$322M | ~$128M | 0.8% |
| FY2024 | $726.5M | $427.4M | $299M | 1.7% |
| FY2025 | $921.0M | $489.2M | $432M | 2.3% |
| TTM | — | — | ~$490M (est.) | ~2.5% |

**FCF trajectory is clearly improving.** FY2023 was depressed by transaction costs (Vestis spin) and integration expenses. FY2024–2025 reflects the clean post-spin base. The path to $600–700M FCF by FY2027 requires continued EBITDA growth (+$150M) and stable CapEx (~2.5% of revenue), which appears achievable at guided growth rates.

CapEx growing to $489M (+15% YoY) reflects accelerated new contract investment — including Nexus data center setups. This is growth capex, not maintenance. Management separates maintenance capex (~1.5% of revenue) from growth capex.

---

#### Source Index

| Code | Source |
|------|--------|
| [S1] | SEC 10-K FY2025 (0001584509-25-000219); XBRL financial data |
| [S2] | StockAnalysis.com — ARMK statistics, short interest (retrieved Jun 2026) |
| [S3] | SEC Proxy DEF 14A 2025 — CEO compensation, governance |

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/ARMK/fundamental

## Navigation

- Overview: /stocks/ARMK
- Financials (this page): /stocks/ARMK/financials
- Thesis: /stocks/ARMK/thesis
- Investment Memo: /stocks/ARMK/memo
- Coverage universe: /stocks