NYSE:ARCO

Stock Analysis Report

Executive Summary

Arcos Dorados Holdings Inc. operates as a franchisee of McDonald’s restaurants.


Snowflake Analysis

Second-rate dividend payer with limited growth.


Similar Companies

Share Price & News

How has Arcos Dorados Holdings's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: ARCO has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

-8.1%

ARCO

-13.9%

US Hospitality

-7.6%

US Market


1 Year Return

-18.2%

ARCO

-7.9%

US Hospitality

10.2%

US Market

Return vs Industry: ARCO underperformed the US Hospitality industry which returned -7.9% over the past year.

Return vs Market: ARCO underperformed the US Market which returned 10.2% over the past year.


Shareholder returns

ARCOIndustryMarket
7 Day-8.1%-13.9%-7.6%
30 Day-14.5%-11.3%-4.5%
90 Day-11.9%-9.8%-0.6%
1 Year-17.0%-18.2%-5.4%-7.9%12.5%10.2%
3 Year12.5%9.4%14.9%7.2%37.1%28.3%
5 Year33.2%29.4%26.0%12.5%60.8%43.2%

Price Volatility Vs. Market

How volatile is Arcos Dorados Holdings's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Arcos Dorados Holdings undervalued compared to its fair value and its price relative to the market?

24.69x

Price to Earnings (PE) ratio


Share Price vs. Fair Value

Below Fair Value: ARCO ($6.78) is trading above our estimate of fair value ($2.62)

Significantly Below Fair Value: ARCO is trading above our estimate of fair value.


Price To Earnings Ratio

PE vs Industry: ARCO is poor value based on its PE Ratio (24.7x) compared to the Hospitality industry average (21.1x).

PE vs Market: ARCO is poor value based on its PE Ratio (24.7x) compared to the US market (17.1x).


Price to Earnings Growth Ratio

PEG Ratio: ARCO is poor value based on its PEG Ratio (1.4x)


Price to Book Ratio

PB vs Industry: ARCO is overvalued based on its PB Ratio (3.7x) compared to the US Hospitality industry average (2x).


Next Steps

Future Growth

How is Arcos Dorados Holdings forecast to perform in the next 1 to 3 years based on estimates from 4 analysts?

17.5%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: ARCO's forecast earnings growth (17.5% per year) is above the savings rate (1.7%).

Earnings vs Market: ARCO's earnings (17.5% per year) are forecast to grow faster than the US market (13.2% per year).

High Growth Earnings: ARCO's earnings are forecast to grow, but not significantly.

Revenue vs Market: ARCO's revenue (5% per year) is forecast to grow slower than the US market (7.6% per year).

High Growth Revenue: ARCO's revenue (5% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: ARCO's Return on Equity is forecast to be low in 3 years time (18.5%).


Next Steps

Past Performance

How has Arcos Dorados Holdings performed over the past 5 years?

51.8%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: ARCO has high quality earnings.

Growing Profit Margin: ARCO's current net profit margins (1.9%) are lower than last year (3%).


Past Earnings Growth Analysis

Earnings Trend: ARCO has become profitable over the past 5 years, growing earnings by 51.8% per year.

Accelerating Growth: ARCO's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: ARCO had negative earnings growth (-42%) over the past year, making it difficult to compare to the Hospitality industry average (-6.1%).


Return on Equity

High ROE: ARCO's Return on Equity (15.1%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Arcos Dorados Holdings's financial position?


Financial Position Analysis

Short Term Liabilities: ARCO's short term assets ($360.0M) do not cover its short term liabilities ($495.2M).

Long Term Liabilities: ARCO's short term assets ($360.0M) do not cover its long term liabilities ($1.4B).


Debt to Equity History and Analysis

Debt Level: ARCO's debt to equity ratio (170.7%) is considered high.

Reducing Debt: ARCO's debt to equity ratio has reduced from 188.1% to 170.7% over the past 5 years.

Debt Coverage: ARCO's debt is well covered by operating cash flow (36.5%).

Interest Coverage: ARCO's interest payments on its debt are not well covered by EBIT (2.9x coverage).


Balance Sheet

Inventory Level: ARCO has a high level of physical assets or inventory.

Debt Coverage by Assets: ARCO's debt is not covered by short term assets (assets are 0.6x debt).


Next Steps

Dividend

What is Arcos Dorados Holdings's current dividend yield, its reliability and sustainability?

1.62%

Current Dividend Yield


Dividend Yield vs Market

company1.6%marketbottom25%1.5%markettop25%4.0%industryaverage3.6%forecastin3Years1.9%

Current dividend yield vs market & industry

Notable Dividend: ARCO's dividend (1.62%) is higher than the bottom 25% of dividend payers in the US market (1.53%).

High Dividend: ARCO's dividend (1.62%) is low compared to the top 25% of dividend payers in the US market (3.96%).


Stability and Growth of Payments

Stable Dividend: ARCO has been paying a dividend for less than 10 years and during this time payments have been volatile.

Growing Dividend: ARCO has only been paying a dividend for 9 years, and since then payments have fallen.


Current Payout to Shareholders

Dividend Coverage: With its reasonably low payout ratio (40.1%), ARCO's dividend payments are well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: ARCO's dividends in 3 years are forecast to be well covered by earnings (26.2% payout ratio).


Next Steps

Management

How experienced are the management team and are they aligned to shareholders interests?

3.0yrs

Average management tenure


CEO

Marcelo Rabach (49yo)

0.6yrs

Tenure

0

Mr. Marcelo Rabach serves as Chief Executive Officer at Arcos Dorados Holdings, Inc. since July 1, 2019. He served as Chief Operating Officer of Arcos Dorados Holdings, Inc. since August 2015 until July 1, ...


Leadership Team

NamePositionTenureCompensationOwnership
Woods Staton
Executive Chairman13.1yrsno data39.2% $542.4m
Marcelo Rabach
Chief Executive Officer0.6yrsno datano data
Mariano Tannenbaum
Chief Financial Officer3yrsno datano data
Luis Raganato
Chief Operating Officer0.6yrsno datano data
David Grinberg
Vice President of Corporate Communications & Investor Relations2.1yrsno datano data
Juan David Bastidas Saldarriaga
Chief Legal Counsel9.6yrsno datano data
Santiago Blanco
Chief Marketing and Digital Officer1.1yrsno datano data
Diego Benenzon
Vice President for Human Resources6.1yrsno datano data
Alejandro Yapur
Divisional President of SLAD6.6yrsno datano data
Paulo Camargo
Divisional President of Brazil4.3yrsno datano data

3.0yrs

Average Tenure

50yo

Average Age

Experienced Management: ARCO's management team is considered experienced (3 years average tenure).


Board Members

NamePositionTenureCompensationOwnership
Woods Staton
Executive Chairman13.1yrsno data39.2% $542.4m
Annette Franqui
Director13.1yrsno datano data
José Alberto Vélez Cadavid
Independent Director8.7yrsno datano data
Siu Chu
Independent Director8.8yrsno datano data
Carlos Hernández-Artigas
Director13.1yrsno datano data
Jorge Ricardo Gutiérrez Muñoz
Independent Director3.6yrsno datano data
Sergio Daniel Alonso
Director0yrsno datano data
José Raul Fernández
Independent Director6.3yrsno datano data
Cristina Palmaka
Independent Director0.3yrsno datano data
Francisco Staton
Director1.8yrsno datano data

8.7yrs

Average Tenure

57yo

Average Age

Experienced Board: ARCO's board of directors are considered experienced (8.7 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Company Information

Arcos Dorados Holdings Inc.'s company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Arcos Dorados Holdings Inc.
  • Ticker: ARCO
  • Exchange: NYSE
  • Founded: 2007
  • Industry: Restaurants
  • Sector: Consumer Services
  • Market Cap: US$1.384b
  • Shares outstanding: 204.07m
  • Website: https://www.arcosdorados.com

Location

  • Arcos Dorados Holdings Inc.
  • Dr. Luis Bonavita 1294
  • Office 501
  • Montevideo
  • 11300
  • Uruguay

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
ARCONYSE (New York Stock Exchange)YesClass A SharesUSUSDApr 2011
AD8DB (Deutsche Boerse AG)YesClass A SharesDEEURApr 2011

Biography

Arcos Dorados Holdings Inc. operates as a franchisee of McDonald’s restaurants. It has the exclusive right to own, operate, and grant franchises of McDonald’s restaurants in 20 countries and territories in Latin America and the Caribbean, including Argentina, Aruba, Brazil, Chile, Colombia, Costa Rica, Curaçao, Ecuador, French Guiana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto Rico, Trinidad and Tobago, Uruguay, the United States Virgin Islands of St. Croix and St. Thomas, and Venezuela. As of March 27, 2019, the company operated or franchised approximately 2,200 McDonald’s-branded restaurants in Latin America. Arcos Dorados Holdings Inc. was founded in 2007 and is based in Montevideo, Uruguay. 


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2020/02/27 01:04
End of Day Share Price2020/02/26 00:00
Earnings2019/09/30
Annual Earnings2018/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.