Are Investors Undervaluing Arcos Dorados (ARCO) 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.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
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 10.79, while its industry has an average P/E of 21.39. Over the last 12 months, ARCO's Forward P/E has been as high as 17.05 and as low as 10.09, with a median of 12.61.
Investors should also note that ARCO holds a PEG ratio of 0.95. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ARCO's industry has an average PEG of 1.48 right now. Over the past 52 weeks, 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 use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. ARCO has a P/S ratio of 0.49. This compares to its industry's average P/S of 0.83.
Finally, investors will want to recognize that ARCO has a P/CF ratio of 6.79. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. ARCO's current P/CF looks attractive when compared to its industry's average P/CF of 16.28. ARCO's P/CF has been as high as 8.07 and as low as 5.42, with a median of 6.74, all within the past year.
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.
Additionally, Carrols Restaurant Group has a P/B ratio of 1.74 while its industry's price-to-book ratio sits at -23.50. For TAST, this valuation metric has been as high as 2.39, as low as 0.43, with a median of 1.21 over the past year.
Value investors will likely look at more than just these metrics, but the above data helps show that Arcos Dorados and Carrols Restaurant Group are likely undervalued currently. And when considering the strength of its earnings outlook, ARCO and TAST sticks out as one of the market's strongest value stocks.
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Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
Carrols Restaurant Group, Inc. (TAST) : Free Stock Analysis Report
