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Arcos Dorados Holdings Inc. Cla Message Board

  • kevin_f_1999 kevin_f_1999 Apr 20, 2011 6:11 PM Flag

    I think a few people on here have never been to a McDonalds in Latin America

    I was desparate to get into this but I was terrified when I saw that it has a PE of 50+. After that I found that it's earnings have gone down for three consecutive years. I will get in someday but I am no longer so anxious. Also, I spend about two months a year in Mexico and I caution that the quality control of McDonalds in Latin America that I have seen is not the same as in the United States. My niece used to work at a What-a-Burger in Guadalajara which was changed to a McDonalds and everyone I know liked it better before the change. Also, it is wrong to assume that people, at least in Mexico, will flock to McDonalds just because they worship American brand names. They are not as naive as we imagine and I can honestly say that my aunt lives two blocks from a McDonalds and she has probably never stepped foot in it in her life. Why would she when they have the absolute awesomest tacos in the world one block away all night long for ten pesos a piece. Having said all of this I think this is an awesome stock in the long term and I WILL buy it, but I also think that it was more than fully valued, based on PE, growth, and equity at the original target price of 13 dollars a share. Remember seven to ten million shares a day is not small time investors that buy with passion and nostalgia. These are ETF funds and mutual funds managers that have no emotional ties to stocks. At some point they will have made their money and they will sell on fundamentals, with no emotional attachement at all. Hopefully, because that is when I hope to buy.

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    • i usnderstand your concern, but keep in mind there are around 2200 arco restaurants and they are not only in mexico. if fact, from what ive seen, brazil has the most. (OLYMPICS ARE COMING). its also hard to find speedy growth with a low P/E

      • 1 Reply to caseyhospital
      • I also looked at the PE.

        When compared to MCD it is high, however, the growth for their 1775 restaurants are going to be much higher than MCD's footprint.

        Also, ARCO will be reinvesting $$$ in existing renovation and in expanding.

        Would love to buy at the MCD PE, but realize their opportunity really will demand a PE closer to CMG.

        I bought my position at 22 and am holding as ARCO growth will recover any PE mistake i "may" have made.

        Good Luck Longs.

    • you have made a lot of sense. new ipo with little money to start with is at $22.00. the only one i hold that does not pay a dividend was from noc's spin off. good luck to all of you that love this. not for me just now.

    • Gracias por la información. I'm considering buying Arco, just not sure yet what the right entry point would be.

    • I have added more, and more, and more every day that the stock has.been going down this week. Those doom, and gloom bears would have wished they would have bought instead of sold this gem a year from now. Oh but wait! The bears don't think that far ahead...LoL!

    • I am still hoping to buy for a long term investment under 20 dollars a share. I think some people are missing a few things here about ARCO.

      Like I said before I travel in Mexico extensively every year and I know that at of all of the people that I have traveled, all of them have adamently refused to go into a McDonalds. They see it as pointless. They can go to that anytime but there is so much wonderful cheap food in Mexico they have no desire to go to a McDonalds. Compounded with that is the fact that McDonalds is very expensive in Mexico, more so than in the US and especially compared to the local food.

      Assuming that the masses in Latin America will embrace it is also naive to an extent. I have many, many relatives in Mexico and none of them have any desire to eat at McDonalds. They young people are into sushi and tacos and the old people are into homemade food, tacos, etc. There are a lot of local restraunts that are very successful.

      Assuming that this company will grow like crazy is also presumptious. If what I read was correct their earnings have been down three years in a row. I see the same problem here in the United States. No one I know will set foot in a McDonalds. It is not that they don't like hamburgers it is just the stigma of McDonalds. They love In-n-Out Burger and ever time I go there it is standing room only. Also, in Santa Cruz there are three new local stores that opened by the name of Betty's Burgers. They charge a lot more than McDonalds but they seem to be doing way better than McDonalds. Additionally a restraunt opened directly across from McDonalds called Burger. I don't know if this is a chain or just a restraunt some local person opened but I know that they also charge twice as much as McDonalds but they serve thirty different types of burgers (and even more types of beer on tap) and they also are often standing room only.

      McDonalds faces a lot of headwinds like the rising prices of for commodities and the health conscious consumer. I just don't know that McDonalds is cool enough. They are doing good in the United States because they are offereing a cheap version of Starbucks and Jamba Juice in one. My kids only want to go there for the Strawberry-Bannana smoothie and the Carmel-Frappe Mochas, not for the food.

    • Also in Mexico at least I have noticed that the quality control of McDonalds is not the same. The climbing structures for kids are sticky and disgusting and the whole play room smells so bad that I don't even like sitting in it.

      Having said all of this I will be buying below 20 because I have been invested with the owner for many years. My all time favorite stock was Pan American Beverages and the owners family founded and ran it until they sold it off to Coca Cola Femsa (which is now my all time favorite current stock). I think they ran Pan American Beverage well but it was a rocky road. They always had conflict with Venezuela and this stock could be the same.

      Last but not least I think many people on here are forgeting that they are not buying McDonalds, they are buying a franchiser. McDonalds will make their royalties and franchise fees one way or another. It does not matter to McDonalds what the margin is on a one dollar double cheese burger. It matters to ARCO. ARCO will always be obligated to make those franchise payments and royalty payments whether they are making money or not. Similarly franchisers are often the first people to take a hit when comodity prices go up and the corporate people won't allow you to pass on the costs. McDonalds says you sell a hamburger for one dollar, you have to sell the hamburger for one dollar, whether you want to or not. Based on that ARCO should not be at a PE of 50 while MCD is at a PE of 17. MCD makes money one way or another. ARCO will always be dependent on MCD to allow them to make money. Considering Staton owns 76% of the company and I don't know that MCDonalds owns any, I don't know that ARCO's profitability is that pressing on their list of concerns. I am sure they are a lot more interested in how they can battle KFC in China than how they can gamble money on expanding in Venezuela where they could be taken over by Chavez any second.

      Anyway, I can't wait to be a shareholder. Just trying to be patient.

    • man i dont understand your thinking! you cant wait to be a shareholder and your sentiment was strong buy. your view and sentiment dont match. Please, give your reasons for the strong buy sentiment too. i get your comments but want to know why youre still a buyer.

    • I can't find a single valid point to your post.

      Restaurants in Mexico are dirtier than in USA. Consumers don't expect the same level of quality. ARCO is using proceeds of IPO in part to clean restaurants.

      ARCO is a Franchisee, we ALL know that. They do pay a franchise fee. The Franchise fee is variable, not a fixed debt obligation, that is a percentage of sales.

      ARCO has been in growth mode, will continue to be using proceeds of IPO. Earnings are used for growth, therefore don't always come out in the form of EPS when a Company is in early stages of Growth.

      Tacos down the street in Mexico may be very tasty to some, however, ARCO/Mcdonalds growth in Latin America are obviously tastier as we've seen their sales grow to over $3B.

      What's ur point exactly?

      Dear God ur annoying.

    • he acts as if mexico has all the restaraunts, most are are in brazil. if he really feels that strong about it, why is he a strong buy guy?

    • They didn't get any proceeds from IPO. That is another misconception. The proceeds from the IPO were investment funds that cashed out. Very little of the IPO was from or to the company.

      I think the franchise fee is fixed. Usually it is a flat fee plus a percent of sales. So it is a permanent debt obligation that never goes away.

      And as far as earnings, they don't really have a lot, thus the pe of 50. Having said all of that, I still think it is a better investment opportunity than anything else I can think of, just at a lower price. I am still looking to buy under 20. I might get impatient, but so far patience has saved me about 4 dollars a share.

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