ARKO

We rate ARKO Corp. (ARKO) as a Hold with a composite score of 61.0/100 at a current price of $6.03. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in value (81th percentile) and quality (60th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (34th percentile) and momentum (52th percentile) tempers our overall conviction. We assign a No Moat rating (30/100), High uncertainty, and Poor capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

ARKO Corp. holds a mid-tier position (#31 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 61.0/100 places it at rank #597 in our full 7,333-stock universe. At $515M in market capitalization, ARKO Corp. is a small-cap player in the Retail Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -15% combined with momentum at the 52th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 28% (-8.2pp vs sector) narrow to operating margins of 1% (-2.5pp vs sector) and net margins of 0.4%, yielding a gross-to-net conversion rate of 1%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $6.03, ARKO Corp. appears undervalued relative to its fundamentals. Our value factor score of 81/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 22.1x (roughly in line with the sector median of 21.4x), EV/EBITDA of 6.2x (discounted to peers), P/B of 2.5x, P/S of 0.1x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a High uncertainty rating to ARKO Corp.. Key risk factors include significant leverage (334% debt-to-equity), below-average price stability (34th percentile), the combination of leverage (334% D/E) and thin margins (0.4% net) amplifies downside risk. The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (334% debt-to-equity); below-average price stability (34th percentile); the combination of leverage (334% D/E) and thin margins (0.4% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 34th percentile and quality factor at the 60th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: a 2.63% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate ARKO Corp.'s capital allocation as Poor. Key concerns include elevated leverage (334% D/E), weak asset returns (ROA 0.9%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — ARKO Corp. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, ARKO Corp. receives a Hold rating with a composite score of 61.0/100 (rank #597 of 7,333). Our quantitative framework assigns a No Moat (30/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 56/100.

Our analysis supports a neutral stance on ARKO Corp.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.