Over the past six months, ABM’s stock price fell to $45.48. Shareholders have lost 6.7% of their capital, which is disappointing considering the S&P 500 has climbed by 6.6%. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy ABM, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is ABM Not Exciting?
Even though the stock has become cheaper, we're swiping left on ABM for now. Here are three reasons why ABM doesn't excite us and a stock we'd rather own.
1. Slow Organic Growth Suggests Waning Demand In Core Business
In addition to reported revenue, organic revenue is a useful data point for analyzing Industrial & Environmental Services companies. This metric gives visibility into ABM’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, ABM’s organic revenue averaged 3.4% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
2. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
ABM’s unimpressive 7.1% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
ABM has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.9%, lousy for a business services business.
Final Judgment
ABM isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 11.2× forward P/E (or $45.48 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at a top digital advertising platform riding the creator economy.
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