Strong And Under The Radar Today: Aramark (ARMK)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Aramark ( ARMK) as a strong and under the radar candidate. In addition to specific proprietary factors, Trade-Ideas identified Aramark as such a stock due to the following factors:

  • ARMK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.3 million.
  • ARMK is making at least a new 3-day high.
  • ARMK has a PE ratio of 39.4.
  • ARMK is mentioned 2.00 times per day on StockTwits.
  • ARMK has not yet been mentioned on StockTwits today.
  • ARMK is currently in the upper 20% of its 1-year range.
  • ARMK is in the upper 35% of its 20-day range.
  • ARMK is in the upper 45% of its 5-day range.
  • ARMK is currently trading above yesterday's high.

'Strong and Under the Radar' stocks tend to be worthwhile stocks to watch for a variety of factors including historical back testing and price action. Market technicians refer to such stocks as being in an accumulation phase before a mark-up and peak. Traders and hedge funds have frequently found that these types of stocks continue to build a solid price base and then ultimately spike higher and peak when others 'discover' how good the stock is performing. By leveraging the social discovery aspect of StockTwits we are highlighting stocks that don't currently receive much attention from retail investors, but we suspect may soon garner more attention.

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More details on ARMK:

Aramark provides food, facilities, and uniform services to education, healthcare, business and industry, sports, leisure, and corrections clients primarily in North America. The stock currently has a dividend yield of 1.1%. ARMK has a PE ratio of 39.4. Currently there are 5 analysts that rate Aramark a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Aramark has been 2.1 million shares per day over the past 30 days. Aramark has a market cap of $7.3 billion and is part of the services sector and leisure industry. Shares are down 1.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Aramark as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • ARAMARK reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ARAMARK increased its bottom line by earning $0.63 versus $0.32 in the prior year. This year, the market expects an improvement in earnings ($1.59 versus $0.63).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 91.0% when compared to the same quarter one year prior, rising from $44.76 million to $85.50 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • The gross profit margin for ARAMARK is currently extremely low, coming in at 11.44%. Regardless of ARMK's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.30% trails the industry average.
  • The debt-to-equity ratio is very high at 3.31 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, ARMK maintains a poor quick ratio of 0.91, which illustrates the inability to avoid short-term cash problems.

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