Are Investors Undervaluing Arcos Dorados (ARCO) Right Now?
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of 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.
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.
Arcos Dorados (ARCO) is a stock many investors are watching right now. ARCO is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 12.85, which compares to its industry's average of 23.53. ARCO's Forward P/E has been as high as 17.05 and as low as 10.09, with a median of 12.24, all within the past year.
ARCO is also sporting a PEG ratio of 1.01. 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 PEG compares to its industry's average PEG of 1.64. Within the past year, ARCO's PEG has been as high as 1.62 and as low as 0.89, 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 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 0.64. This compares to its industry's average P/S of 0.96.
Finally, investors should note that ARCO has a P/CF ratio of 8.04. 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. This stock's P/CF looks attractive against its industry's average P/CF of 17.64. Over the past 52 weeks, ARCO's P/CF has been as high as 8.18 and as low as 5.42, with a median of 6.82.
Carrols Restaurant Group (TAST) may be another strong Retail - Restaurants stock to add to your shortlist. TAST is a # 1 (Strong Buy) stock with a Value grade of A.
Additionally, Carrols Restaurant Group has a P/B ratio of 2.40 while its industry's price-to-book ratio sits at -27.61. For TAST, this valuation metric has been as high as 2.41, as low as 0.43, with a median of 1.69 over the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Arcos Dorados and Carrols Restaurant Group are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ARCO and TAST feels like a great value stock at the moment.
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Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
Carrols Restaurant Group, Inc. (TAST) : Free Stock Analysis Report
