Should Value Investors Buy Arcos Dorados (ARCO) Stock?
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.
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.
One company to watch right now is Arcos Dorados (ARCO). ARCO is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 18.71 right now. For comparison, its industry sports an average P/E of 24.27. ARCO's Forward P/E has been as high as 28.70 and as low as 16.54, with a median of 19.02, all within the past year.
Investors should also note that ARCO holds a PEG ratio of 0.96. 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 2.18.
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 0.55. 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 9.57. 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 17.37. ARCO's P/CF has been as high as 13.26 and as low as 7.60, with a median of 9.17, all within the past year.
These are just a handful of the figures considered in Arcos Dorados'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 is an impressive value stock right now.
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