ARCO vs. CMG: Which Stock Is the Better Value Option?
Investors with an interest in Retail - Restaurants stocks have likely encountered both Arcos Dorados (ARCO) and Chipotle Mexican Grill (CMG). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Arcos Dorados has a Zacks Rank of #2 (Buy), while Chipotle Mexican Grill has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ARCO is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
ARCO currently has a forward P/E ratio of 12.11, while CMG has a forward P/E of 41.56. We also note that ARCO has a PEG ratio of 1.06. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CMG currently has a PEG ratio of 1.54.
Another notable valuation metric for ARCO is its P/B ratio of 4.92. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, CMG has a P/B of 17.88.
Based on these metrics and many more, ARCO holds a Value grade of A, while CMG has a Value grade of D.
ARCO sticks out from CMG in both our Zacks Rank and Style Scores models, so value investors will likely feel that ARCO is the better option right now.
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Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
