While Arcos Dorados Holdings Inc. (NYSE:ARCO) might not have the largest market cap around , it saw a significant share price rise of 38% in the past couple of months on the NYSE. The recent share price gains has brought the company back closer to its yearly peak. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Arcos Dorados Holdings's outlook and valuation to see if the opportunity still exists.
See our latest analysis for Arcos Dorados Holdings
Is Arcos Dorados Holdings Still Cheap?
Great news for investors – Arcos Dorados Holdings is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that Arcos Dorados Holdings's ratio of 14.3x is below its peer average of 20.41x, which indicates the stock is trading at a lower price compared to the Hospitality industry. Although, there may be another chance to buy again in the future. This is because Arcos Dorados Holdings's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Arcos Dorados Holdings generate?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. Arcos Dorados Holdings' earnings over the next few years are expected to increase by 66%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? Since ARCO is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you've been keeping an eye on ARCO for a while, now might be the time to make a leap. Its prosperous future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy ARCO. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Arcos Dorados Holdings, and understanding them should be part of your investment process.
If you are no longer interested in Arcos Dorados Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.