In March 2019, Arcos Dorados Holdings Inc. (NYSE:ARCO) announced its earnings update. Overall, it seems that analyst forecasts are substantially optimistic, as a 67% rise in profits is expected in the upcoming year, against the previous 5-year average growth rate of 53%. By 2020, we can expect Arcos Dorados Holdings’s bottom line to reach US$62m, a jump from the current trailing-twelve-month of US$37m. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Arcos Dorados Holdings in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
What can we expect from Arcos Dorados Holdings in the longer term?
The view from 5 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of ARCO's earnings growth over these next few years.
From the current net income level of US$37m and the final forecast of US$89m by 2022, the annual rate of growth for ARCO’s earnings is 17%. This leads to an EPS of $0.51 in the final year of projections relative to the current EPS of $0.18. Margins are currently sitting at 1.2%, which is expected to expand to 2.4% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Arcos Dorados Holdings, I've compiled three fundamental aspects you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Arcos Dorados Holdings worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Arcos Dorados Holdings is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Arcos Dorados Holdings? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.