Back to top

Image: Bigstock

Are Investors Undervaluing Arcos Dorados (ARCO) Right Now?

Read MoreHide Full Article

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.

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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company value investors might notice is Arcos Dorados (ARCO - Free Report) . ARCO is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 19.78, which compares to its industry's average of 26.53. ARCO's Forward P/E has been as high as 28.70 and as low as 16.54, with a median of 19.18, all within the past year.

Investors will also notice that ARCO has a PEG ratio of 0.96. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ARCO's industry currently sports an average PEG of 2.38.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. 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 0.56. This compares to its industry's average P/S of 0.91.

Finally, our model also underscores that ARCO has a P/CF ratio of 10.25. 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. This company's current P/CF looks solid 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 7.76, with a median of 9.24, all within the past year.

These are only a few of the key metrics included in Arcos Dorados's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, ARCO looks like an impressive value stock at the moment.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


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

Published in