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

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Investors interested in Retail - Restaurants stocks are likely familiar with Arcos Dorados (ARCO - Free Report) and Chipotle Mexican Grill (CMG - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, Arcos Dorados is sporting a Zacks Rank of #2 (Buy), while Chipotle Mexican Grill has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ARCO is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

ARCO currently has a forward P/E ratio of 15.14, while CMG has a forward P/E of 52.10. We also note that ARCO has a PEG ratio of 0.44. 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. CMG currently has a PEG ratio of 2.23.

Another notable valuation metric for ARCO is its P/B ratio of 7.29. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CMG has a P/B of 21.83.

These are just a few of the metrics contributing to ARCO's Value grade of A and CMG's Value grade of D.

ARCO stands above CMG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ARCO is the superior value option right now.


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Chipotle Mexican Grill, Inc. (CMG) - free report >>

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

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