Is Arcos Dorados (ARCO) Stock Undervalued Right Now?
The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
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 company value investors might notice is Arcos Dorados (ARCO). ARCO is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock is trading with a P/E ratio of 10.78, which compares to its industry's average of 21.76. Over the last 12 months, ARCO's Forward P/E has been as high as 17.05 and as low as 10.50, with a median of 12.89.
We also note that ARCO holds a PEG ratio of 0.95. 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. ARCO's PEG compares to its industry's average PEG of 1.54. Over the last 12 months, ARCO's PEG has been as high as 1.62 and as low as 0.36, with a median of 1.23.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ARCO has a P/S ratio of 0.5. This compares to its industry's average P/S of 0.89.
Finally, our model also underscores that ARCO has a P/CF ratio of 6.73. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. ARCO's current P/CF looks attractive when compared to its industry's average P/CF of 16.51. Within the past 12 months, ARCO's P/CF has been as high as 8.07 and as low as 5.42, with a median of 6.71.
If you're looking for another solid Retail - Restaurants value stock, take a look at Carrols Restaurant Group (TAST). TAST is a # 1 (Strong Buy) stock with a Value score of A.
Carrols Restaurant Group also has a P/B ratio of 2.12 compared to its industry's price-to-book ratio of -23.74. Over the past year, its P/B ratio has been as high as 2.39, as low as 0.43, with a median of 0.80.
These are just a handful of the figures considered in Arcos Dorados and Carrols Restaurant Group's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that ARCO and TAST is an impressive value stock right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
Carrols Restaurant Group, Inc. (TAST) : Free Stock Analysis Report
