Is Now The Time To Look At Buying Arcos Dorados Holdings Inc. (NYSE:ARCO)?

While Arcos Dorados Holdings Inc. (NYSE:ARCO) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NYSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Arcos Dorados Holdings’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Arcos Dorados Holdings

What Is Arcos Dorados Holdings Worth?

Great news for investors – Arcos Dorados Holdings is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 12.89x is currently well-below the industry average of 19.66x, meaning that it is trading at a cheaper price relative to its peers. However, given that Arcos Dorados Holdings’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Arcos Dorados Holdings look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by a double-digit 17% over the next couple of years, the outlook is positive for Arcos Dorados Holdings. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? Since ARCO is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on ARCO for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ARCO. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Arcos Dorados Holdings at this point in time. At Simply Wall St, we found 2 warning signs for Arcos Dorados Holdings and we think they deserve your attention.

If you are no longer interested in Arcos Dorados Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.