Arcos Dorados Holdings Inc. (ARCO)
Valuation Overview•Is Arcos Dorados Holdings Inc. Overvalued or Undervalued?
Trading at a discount compared to peers, but the underlying intrinsic cash flows struggle to support the current price.
Moderate quality score of 48/100, reflecting stable operating margins and manageable leverage.
Analysts remain bullish, forecasting further upside expansion with consensus targets suggesting solid gains.
Verdict: Average quality business weighed down by significant solvency concerns.
Wall Street is highly bullish, projecting significant upside. This is paired with healthy capital returns, anchored by a strong dividend yield, though free cash flow coverage appears tight.
ARCO demonstrates adequate business quality with stable profitability. However, the balance sheet carries elevated leverage, requiring careful monitoring of debt servicing capabilities.
The company demonstrates solid revenue growth (8.9% 3Y CAGR) paired with robust earnings compounding (14.7% EPS 3Y CAGR). Operating efficiency remains adequate with margins around 7.5%.
| Financial Metric | Trend (12Q) | Latest Qtr | 1Y Growth | 3Y CAGR | 5Y CAGR | 10Y CAGR |
|---|---|---|---|---|---|---|
| Revenue | $1.2B | +4.7% | +8.9% | +18.7% | +4.4% | |
| EBITDA | $111.1M | — | +12.5% | — | — | |
| Net Income | $36.1M | +42.6% | +14.8% | — | — | |
| EPS (Diluted) | $0.17 | +42.3% | +14.7% | — | — | |
| Free Cash Flow | -$18.7M | +124.7% | -51.1% | — | — |
| Metric | TTM | 3Y Avg | 5Y Avg | 10Y Avg |
|---|---|---|---|---|
| Gross Margin | 12.2% | 13.1% | 13.0% | 12.2% |
| Operating Margin | 7.5% | 7.3% | 6.9% | 5.5% |
| Net Margin | 4.9% | 4.0% | 3.5% | 2.1% |
| FCF Margin | 1.1% | -0.2% | 1.7% | 0.8% |
| Quarter | EPS Est. | EPS Act. | Surprise | EPS | Rev |
|---|---|---|---|---|---|
| Q2'26Latest | $0.11 | $0.17 | +54.5% | ||
| Q1'26 | $0.20 | $-0.04 | -119.7% | ||
| Q4'25 | $0.10 | $0.12 | +20.0% | ||
| Q3'25 | $0.05 | $0.11 | +120.0% | ||
| Q2'25 | $0.13 | $0.07 | -46.2% | ||
| Q1'25 | $0.22 | $0.28 | +27.3% | ||
| Q4'24 | $0.16 | $0.17 | +6.3% | ||
| Q3'24 | $0.13 | $0.13 | +0.0% |
Total return is +15.5% (1Y), lagging the benchmark by -9.5%
| Period | Total Return | vs S&P 500 (Alpha) | Dividend Contribution |
|---|---|---|---|
| YTD | +18.2% | +8.9% | — |
| 1Y | +15.5% | -9.5% | +3.3% |
| 3YCAGR | -0.8% | -20.3% | +7.3% |
| 5YCAGR | +8.9% | -4.1% | +14.4% |
| 10YCAGR | +7.6% | -6.1% | — |
The S&P 500 is at 31.3x trailing P/E — Expensive relative to historical averages.
Quick answers to common questions about Arcos Dorados Holdings Inc. (ARCO) valuation, health, and returns.
Arcos Dorados Holdings Inc. is estimated to be overvalued under our discounted cash flow framework. relative multiples indicate the stock is Cheap versus peers compared to industry peers. overvalued (implying -53.5% downside from DCF intrinsic value of $3.98)
Arcos Dorados Holdings Inc. has multiple valuation anchors: DCF Intrinsic Value: $3.98 | Peer Relative Fair Value: $21.36 | Wall Street Analyst Target: $11.53 (implying +34.9% upside). A convergence of these signals offers higher conviction.
Arcos Dorados Holdings Inc. displays fair financial health with a composite quality score of 48/100, supported by a Altman Z-Score of 1.5 (distress zone), Piotroski F-Score of 7/9, Return on Invested Capital (ROIC) of 11.1%.
Arcos Dorados Holdings Inc. pays a 2.8% dividend yield, covered by a 24% payout ratio with 0 years of growth, supplemented by a 0.0% buyback yield.
Arcos Dorados Holdings Inc.'s current growth trajectory is Decelerating. The company achieved +4.7% 1Y revenue growth and +42.3% 1Y EPS growth, compared to its 3Y revenue CAGR of +8.9%.
Wall Street consensus is Buy based on 12 analysts, beating EPS expectations in 50% of recent quarters with a 1-quarter streak. The consensus price target represents a +34.9% change from current levels.
Investment risks for Arcos Dorados Holdings Inc. include: -17.9% 1-year max drawdown, elevated distress risk. Volatility risk is characterized by a beta of 1.12x.
No. These computations are purely quantitative model outputs for informational purposes. They do not account for qualitative management shifts or macro events. Always consult a licensed RIA before buying or selling shares.
Disclaimer: This page is for informational purposes only and does not constitute financial advice. All valuation models, scores, and target estimates are automated computations under stated assumptions and should not be relied upon as the sole basis for any investment decision.