Arcos Dorados Holdings (NYSE: ARCO) and Fogo de Chao (NASDAQ:FOGO) are both retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, institutional ownership, dividends, profitability, earnings and risk.

Earnings & Valuation

This table compares Arcos Dorados Holdings and Fogo de Chao’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Arcos Dorados Holdings $3.16 billion 0.66 $249.87 million $0.26 37.88
Fogo de Chao $304.00 million 1.15 $52.73 million $0.79 15.70

Arcos Dorados Holdings has higher revenue and earnings than Fogo de Chao. Fogo de Chao is trading at a lower price-to-earnings ratio than Arcos Dorados Holdings, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Arcos Dorados Holdings has a beta of 2.16, suggesting that its share price is 116% more volatile than the S&P 500. Comparatively, Fogo de Chao has a beta of 0.38, suggesting that its share price is 62% less volatile than the S&P 500.

Profitability

This table compares Arcos Dorados Holdings and Fogo de Chao’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arcos Dorados Holdings 1.76% 14.68% 3.69%
Fogo de Chao 7.40% 8.08% 4.58%

Insider & Institutional Ownership

36.7% of Arcos Dorados Holdings shares are owned by institutional investors. Comparatively, 85.7% of Fogo de Chao shares are owned by institutional investors. 82.8% of Fogo de Chao shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Arcos Dorados Holdings and Fogo de Chao, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arcos Dorados Holdings 0 0 3 0 3.00
Fogo de Chao 0 3 3 0 2.50

Arcos Dorados Holdings currently has a consensus target price of $9.53, indicating a potential downside of 3.21%. Fogo de Chao has a consensus target price of $16.42, indicating a potential upside of 32.39%. Given Fogo de Chao’s higher possible upside, analysts plainly believe Fogo de Chao is more favorable than Arcos Dorados Holdings.

Summary

Fogo de Chao beats Arcos Dorados Holdings on 7 of the 13 factors compared between the two stocks.

About Arcos Dorados Holdings

Arcos Dorados Holdings Inc. is a McDonald’s franchisee. The Company operates or franchises over 2,140 McDonald’s-branded restaurants. It divides its operations into four geographical divisions: Brazil; the Caribbean division, consisting of Aruba, Colombia, Curacao, French Guiana, Guadeloupe, Martinique, Puerto Rico, Trinidad and Tobago, the United States Virgin Islands of Saint Croix and Saint Thomas, and Venezuela; the North Latin America division (NOLAD), consisting of Costa Rica, Mexico and Panama, and the South Latin America division (SLAD), consisting of Argentina, Chile, Ecuador, Peru and Uruguay. Its menus feature over three tiers of products: entry-level options, such as its Big Pleasures, Small Prices offerings and Almuerzos Colombianos (Colombian Lunches) in Colombia; core menu options, such as the Big Mac, Happy Meal and Quarter Pounder, and premium options, such as Big Tasty or Angus premium hamburgers and chicken sandwiches and low-calorie or low-sodium products.

About Fogo de Chao

Fogo de Chao, Inc. is a United States-based holding company. The Company, through its subsidiaries, operates upscale Brazilian churrascaria steakhouses under the brand of Fogo de Chao. The Company owns 100% of Brasa (Purchaser) Inc. (Brasa Purchaser), which owns 100% of Brasa (Holdings) Inc. (Brasa Holdings). The Company operates through two segments: United States and Brazil. It specializes in fire-roasting meats utilizing the centuries-old Southern Brazilian cooking technique of churrasco. The Company offers its guests a tasting menu of meats featuring up to 20 cuts, simply seasoned and fire-roasted to expose their natural flavors. The Company operates approximately 26 restaurants in the United States, 10 in Brazil and one in Mexico. The Company operates a range of restaurant formats, including in-line and free-standing locations. Its restaurants range in size from approximately 7,000 to 16,000 square feet, with seating from 200 to 500 guests.

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