ABM

ABM is a low-margin, scale-driven facilities-services business: FY2025 revenue grew a steady +4.6% to $8.75B, but the model converts little of that to profit — gross margin, operating margin 3.6%, and net margin just 1.9%. The headline +99.5% jump in net income to $162M and +102% EPS to $2.59 flatter the picture; net income is recovering off a depressed FY2024 ($81.4M) and still sits below FY2022 ($230M) and FY2023 ($251M). So this is a cyclical rebound to roughly trend, not a step-change in earning power. ROE of 9.1% confirms a decent-but-unexciting quality profile. (Note: the provided 'gross profit' tag is stale FY2011 data, so the 5.3% gross-margin figure is unreliable and excluded from the thesis.)

The balance sheet is the watch item. Long-term debt rose +18% to $1.54B against only $104M of cash and $1.79B of equity (liabilities/equity 1.95x). The MD&A shows why: management amended the credit facility in Feb 2025, lifting the revolver to $1.6B and the term loan to $600M, with $577.5M of capacity remaining and a generous 5.0x max net-leverage covenant (5.5x on a 'material acquisition'). FY2025 operating cash flow of $234M less $79.3M capex leaves ~$155M of free cash, which did not fully cover the $122M of buybacks (more than doubled YoY) plus $65.6M of dividends — the gap is being bridged with debt. That's sustainable at current leverage but leaves less cushion for an acquisition or a demand downturn, and the ELEVATE technology spend and insurance-claim funding are ongoing calls on cash.