Head to Head Survey: Arcos Dorados (NYSE:ARCO) versus Shake Shack (NYSE:SHAK)

Shake Shack (NYSE:SHAK) and Arcos Dorados (NYSE:ARCO) are both retail/wholesale companies, but which is the better stock? We will compare the two companies based on the strength of their valuation, profitability, institutional ownership, earnings, dividends, risk and analyst recommendations.

Analyst Recommendations

This is a summary of current ratings and target prices for Shake Shack and Arcos Dorados, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shake Shack	1	11	15	0	2.52
Arcos Dorados	0	3	2	0	2.40

Shake Shack presently has a consensus target price of $91.00, suggesting a potential upside of 60.94%. Arcos Dorados has a consensus target price of $8.70, suggesting a potential upside of 5.54%. Given Shake Shack’s stronger consensus rating and higher probable upside, analysts clearly believe Shake Shack is more favorable than Arcos Dorados.

Volatility and Risk

Shake Shack has a beta of 1.63, suggesting that its share price is 63% more volatile than the S&P 500. Comparatively, Arcos Dorados has a beta of 0.48, suggesting that its share price is 52% less volatile than the S&P 500.

Profitability

This table compares Shake Shack and Arcos Dorados’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Shake Shack	2.76%	9.62%	2.81%
Arcos Dorados	4.86%	10.47%	2.06%

Earnings and Valuation

This table compares Shake Shack and Arcos Dorados”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Shake Shack	$1.45 billion	1.67	$45.72 million	$0.98	57.70
Arcos Dorados	$4.68 billion	0.37	$212.12 million	$1.11	7.43

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

Institutional and Insider Ownership

86.1% of Shake Shack shares are owned by institutional investors. Comparatively, 55.9% of Arcos Dorados shares are owned by institutional investors. 8.3% of Shake Shack 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.

Summary

Shake Shack beats Arcos Dorados on 9 of the 14 factors compared between the two stocks.

About Shake Shack

Shake Shack Inc. owns, operates, and licenses Shake Shack restaurants (Shacks) in the United States and internationally. Its Shacks offers hamburgers, chicken, hot dogs, crinkle cut fries, shakes, frozen custard, beer, wine, and other products. The company was founded in 2001 and is headquartered in New York, New York.

About Arcos Dorados

Arcos Dorados Holdings Inc. operates as a franchisee of McDonald’s restaurants. It has the exclusive right to own, operate, and grant franchises of McDonald’s restaurants in 20 countries and territories in Latin America and the Caribbean, including Argentina, Aruba, Brazil, Chile, Colombia, Costa Rica, Curacao, Ecuador, French Guiana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto Rico, Trinidad and Tobago, Uruguay, the U.S. Virgin Islands of St. Croix and St. Thomas, and Venezuela. The company was founded in 2007 and is based in Montevideo, Uruguay.