Is Arcos Dorados (ARCO) Stock Undervalued Right Now?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One stock to keep an eye on is Arcos Dorados (ARCO). ARCO is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 14.13, while its industry has an average P/E of 24.68. Over the past year, ARCO's Forward P/E has been as high as 276.72 and as low as 13.05, with a median of 18.54.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. ARCO has a P/S ratio of 0.58. This compares to its industry's average P/S of 1.31.
Finally, we should also recognize that ARCO has a P/CF ratio of 7.53. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. ARCO's current P/CF looks attractive when compared to its industry's average P/CF of 15.81. Over the past 52 weeks, ARCO's P/CF has been as high as 14.48 and as low as 3.59, with a median of 7.13.
Another great Retail - Restaurants stock you could consider is Ruth's Hospitality Group (RUTH), which is a # 2 (Buy) stock with a Value Score of A.
Shares of Ruth's Hospitality Group currently holds a Forward P/E ratio of 12.02, and its PEG ratio is 0.73. In comparison, its industry sports average P/E and PEG ratios of 24.68 and 2.05.
Over the past year, RUTH's P/E has been as high as 19.50, as low as 10.44, with a median of 14.38; its PEG ratio has been as high as 1.30, as low as 0.73, with a median of 0.48 during the same time period.
Ruth's Hospitality Group also has a P/B ratio of 4.35 compared to its industry's price-to-book ratio of -20.49. Over the past year, its P/B ratio has been as high as 6.30, as low as 3.74, with a median of 5.03.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Arcos Dorados and Ruth's Hospitality Group are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ARCO and RUTH feels like a great value stock at the moment.
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Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
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