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Reasons to Hold on to ABM Industries (ABM) Stock For Now

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ABM Industries Incorporated’s (ABM - Free Report) shares have charted a solid trajectory, appreciating 27.5% over the past year against the industry’s loss of 1.1%.

The company has an impressive Growth Score of A. This style score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. ABM’s earnings are expected to register 44.9% growth in 2021.

Factors That Auger Well

ABM started a comprehensive transformational initiative called 2020 Vision in 2015, aimed at attaining long-term profitable growth through an industry-based go-to-market approach. As parts of this initiative, the company has centralized key functional areas, reinforced sales capabilities, and is investing in service delivery tools and processes for supporting standard operating practices that are important for its long-term success. These, in turn, have enhanced ABM’s Janitorial, Parking, Facilities Services, Building & Energy Solutions, and Airline Services offerings, and strengthened its position as a leading integrated facilities management company.

The recently closed acquisition of Able Services is expected to strengthen ABM’s engineering and technical services, and expand its sustainability and energy efficiency offerings. The buyout adds $1.1 billion in engineering and janitorial services revenues, and is anticipated to achieve around $30 million to $40 million in cost synergies for the company.

ABM has a consistent track record of returning value to shareholders through dividends. The company paid a respective $49.3 million, $47.7 million, $46 million and $39.5 million in dividends in fiscals 2020, 2019, 2018 and 2017.

Some Risks

ABM's cash and cash equivalent balance of $505 million at the end of third-quarter fiscal 2021 was well below the long-term debt level of $624 million, underscoring that the company does not have enough cash to meet this debt burden. However, the cash level can meet the short-term debt of $31 million.

Zacks Rank and Stocks to Consider

ABM currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are ManpowerGroup (MAN - Free Report) , Cross Country Healthcare (CCRN - Free Report)  and Genpact Limited (G - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term expected earnings per share (three to five years) growth rate for ManpowerGroup, Cross Country Healthcare and Genpact is pegged at 24.2%, 9.9% and 14.7%, respectively.