Morning Movers Gapping up $Micron Technology (MU.US)$shares surged 16% after the chipmaker released current-quarter guidance that significantly exceeded analysts' expectations, driven by soaring demand for its memory chips used in artificial intelligence applications. $Aramark (ARMK.US)$shares climbed 5.5% after a Bloomberg report indicated that French competitor Sodexo (EPA:EXHO) is contemplating a takeover of the food cate...
Aramark's low P/E ratio is due to its predicted earnings drop. Shareholders accept this, acknowledging future earnings may not impress. If profitability doesn't improve, the P/E could fall further, limiting the share price.
Aramark's underlying earnings power may be lower than its statutory profit due to the significant contribution from unusual items. Despite the strong EPS growth, the company's earnings may not be a reliable indicator of its underlying profitability.
Despite better EPS, a share price drop could reflect over-optimism about growth. The recent sell-off might be an opportunity if sustainable growth is likely, but Aramark's investment analysis shows 3 warning signs, 2 being troubling.
The Jeffries report praises Aramark's turnaround effort, changes to salesforce and compensation structures, along with an optimistic outlook on margin enhancement from new business development and productivity investments.
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