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ARCO vs. PTLO: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Retail - Restaurants sector might want to consider either Arcos Dorados (ARCO - Free Report) or Portillo's Inc. (PTLO - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Arcos Dorados has a Zacks Rank of #2 (Buy), while Portillo's Inc. has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that ARCO likely has seen a stronger improvement to its earnings outlook than PTLO has recently. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

ARCO currently has a forward P/E ratio of 21.05, while PTLO has a forward P/E of 76.94. We also note that ARCO has a PEG ratio of 0.85. 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. PTLO currently has a PEG ratio of 1.93.

Another notable valuation metric for ARCO is its P/B ratio of 8.84. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, PTLO has a P/B of 12.12.

These are just a few of the metrics contributing to ARCO's Value grade of B and PTLO's Value grade of C.

ARCO sticks out from PTLO in both our Zacks Rank and Style Scores models, so value investors will likely feel that ARCO is the better option right now.


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Arcos Dorados Holdings Inc. (ARCO) - free report >>

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