Are Investors Undervaluing Arcos Dorados (ARCO) 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.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company to watch right now is Arcos Dorados (ARCO). ARCO is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 12.99. This compares to its industry's average Forward P/E of 24.11. ARCO's Forward P/E has been as high as 17.05 and as low as 10.55, with a median of 13.14, all within the past year.
We also note that ARCO holds a PEG ratio of 1.37. 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. ARCO's industry currently sports an average PEG of 1.72. ARCO's PEG has been as high as 1.62 and as low as 0.36, with a median of 1.21, all within the past year.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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 0.6. This compares to its industry's average P/S of 1.02.
Finally, investors will want to recognize that ARCO has a P/CF ratio of 8.04. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. ARCO's current P/CF looks attractive when compared to its industry's average P/CF of 19.87. Over the past 52 weeks, ARCO's P/CF has been as high as 8.61 and as low as 5.42, with a median of 6.67.
Investors could also keep in mind Dave & Buster's Entertainment (PLAY), an Retail - Restaurants stock with a Zacks Rank of # 1 (Strong Buy) and Value grade of A.
Dave & Buster's Entertainment is currently trading with a Forward P/E ratio of 10.37 while its PEG ratio sits at 0.68. Both of the company's metrics compare favorably to its industry's average P/E of 24.11 and average PEG ratio of 1.72.
Over the past year, PLAY's P/E has been as high as 16.31, as low as 9.08, with a median of 10.90; its PEG ratio has been as high as 0.81, as low as 0.61, with a median of 1.21 during the same time period.
Dave & Buster's Entertainment sports a P/B ratio of 4.96 as well; this compares to its industry's price-to-book ratio of -23. In the past 52 weeks, PLAY's P/B has been as high as 6.28, as low as 3.93, with a median of 5.02.
These are only a few of the key metrics included in Arcos Dorados and Dave & Buster's Entertainment strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, ARCO and PLAY look like an impressive value stock at the moment.
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Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
Dave & Buster's Entertainment, Inc. (PLAY) : Free Stock Analysis Report
