ARCO vs. WEN: Which Stock Is the Better Value Option?
Investors with an interest in Retail - Restaurants stocks have likely encountered both Arcos Dorados (ARCO) and Wendy's (WEN). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Arcos Dorados has a Zacks Rank of #1 (Strong Buy), while Wendy's has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ARCO has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ARCO currently has a forward P/E ratio of 13.89, while WEN has a forward P/E of 23.35. We also note that ARCO has a PEG ratio of 1.20. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. WEN currently has a PEG ratio of 2.38.
Another notable valuation metric for ARCO is its P/B ratio of 7.36. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, WEN has a P/B of 11.06.
Based on these metrics and many more, ARCO holds a Value grade of B, while WEN has a Value grade of C.
ARCO stands above WEN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ARCO is the superior value option right now.
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Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
The Wendy's Company (WEN) : Free Stock Analysis Report
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