Arcos Dorados (NYSE:ARCO): A Fresh Look at Valuation as Investor Sentiment Shifts

Arcos Dorados Holdings (NYSE:ARCO) has seen some interesting action recently, even without a major headline event driving movement. Investors are likely weighing recent performance and valuations as they look for signals on where the stock could head next.

See our latest analysis for Arcos Dorados Holdings.

After a challenging stretch, Arcos Dorados Holdings has seen its share price recover modestly this week, suggesting that investors are considering its future growth story in light of recent underperformance. Despite recent gains, the stock’s 1-year total shareholder return sits at -25.14%, highlighting lost momentum. Its 5-year total return of nearly 79% indicates there may be long-term potential if sentiment shifts.

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With the stock still trading well below analyst price targets, investors are left to wonder if Arcos Dorados is undervalued and positioned for a rebound, or if the market is already factoring in all of its future growth.

Most Popular Narrative: 34.3% Undervalued

With the narrative fair value set at $10.4, Arcos Dorados Holdings trades well under this target after closing at $6.83. This valuation gap captures a bullish outlook among analysts, who appear focused on future growth drivers despite recent stock weakness.

Continued digital adoption, including loyalty program rollouts, app engagement, and digital ordering, are driving higher visit frequency, stronger customer retention, and higher identified sales. This is likely to support future revenue growth and improve gross margins as digital channels scale.

Read the complete narrative.

Curious what makes analysts so optimistic? The foundation of this valuation rests on ambitious growth assumptions and profit targets that rival the sector’s standouts. If you want to see which numbers could turn Arcos Dorados from today’s laggard into tomorrow’s star, dive into the full narrative for the complete playbook.

Result: Fair Value of $10.4 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent macroeconomic volatility or rising competitive pressures in Brazil could threaten Arcos Dorados's recovery and put future earnings momentum at risk.

Find out about the key risks to this Arcos Dorados Holdings narrative.

Another View: SWS DCF Model Brings a Different Angle

While some analysts see strong upside based on growth and margin forecasts, the SWS DCF model provides a much more cautious picture. According to this method, Arcos Dorados shares may actually be trading above its estimated fair value. Is the market overlooking risks, or is the DCF too conservative?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Arcos Dorados Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Arcos Dorados Holdings Narrative

If you see the story unfolding differently or want to analyze the numbers on your own terms, you can build your own perspective in just a few minutes with Do it your way.

A great starting point for your Arcos Dorados Holdings research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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