ARCO
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MASTER
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ESEN VERDICT
Analyzing…
Horizon6–12M
Confidence—
Data coverage—
I'll analyze ARCO (Arcos Dorados Holdings Inc) and provide you with an institutional equity research report. Let me first search for the latest analyst price targets to complete the analysis.
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ARCO: ESEN Master Institutional Scorecard
| Metric | Grade | Score | Evidence | Horizon |
|---|---|---|---|---|
| FINAL ESEN MASTER SCORE | B+ | 76 | Hyper-growth profile (84% rev growth YoY, 74% EPS growth YoY) with exceptional valuation (P/E 8.27, PEG 0.11) and recent JP Morgan upgrade. Beta 0.49 provides downside cushion. Dividend yield 3.38% strengthens total return. Risk: real vs. nominal growth decomposition; currency/inflation headwinds acknowledged. | 6–12M |
| SA Quality/Value Composite | A− | 85 | P/E 8.27 vs. 5Y median 12x → 30% discount to historical norm. Forward P/E 10.22 maintains compressive entry. PEG 0.11 signals growth underpriced. Market cap $1.75B; modest scale but profitable McDonald's franchisee. | 1–3M |
| Zacks Earnings Momentum | A | 87 | EPS growth +74.41% YoY; revenue growth +84.29% YoY. Q1 2026: EBITDA +30%, margin expansion in Brazil. Disciplined cost management and digital-driven engagement. Earnings date not disclosed; next catalyst critical. | 1–3M |
| Institutional & Smart Money Flow | B+ | 75 | JP Morgan upgrade to Overweight (July 17, 2026) with $10.50 PT (16.67% increase from prior $9.00) signals institutional conviction. Analyst consensus raised from $7.80 to $9.00–$10.69 range. 9 analysts covering; 6 Buy, 3 Hold. Recent history mixed (downgrades prior months) but sentiment shifted constructive. | 6–12M |
| Growth Sustainability & Moat | B | 72 | Exclusive McDonald's franchisee, Latin America & Caribbean. Digital sales and loyalty programs active; margin expansion evident. Risk: "apparent growth largely currency/inflation-driven, not genuine business improvement" per Simply Wall St. Underlying organic growth unclear; FX headwind decomposition needed. Strong brand moat offset by EM macro sensitivity. | 6–12M |
| Valuation & Safety (Pre-Penalty) | A | 88 | Current price $8.28 vs. GF Value $9.49 = 12.8% undervalued. P/E 8.27 with EPS $1.11 provides margin of safety. Low beta 0.49 vs. market 1.0 → reduced systematic risk. Dividend-covered 24% payout ratio (sustainable). Week 52 range $6.51–$9.75; current near mid-range. | 1–3M |
| Penalty Overlay (Risk Adjust) | −10 pts | −10 | Data gaps: Earnings date, ex-dividend date, TTM revenue, detailed balance sheet not disclosed. Real-growth decomposition (currency/inflation mix) opaque. Cash-payout ratio 393% signals dividend risk if earnings deteriorate. Execution risk on Brazil margin gains; EM macro volatility. Forward P/E 10.22 implies modest premium to current P/E 8.27 (EPS stability question). | 6–12M |
| CONFIDENCE SCORE | B+ | 74 | Live data complete for current metrics; analyst consensus robust (9 analysts, 6 Buy). Recent upgrade credible (JP Morgan). Constraints: no TTM revenue, earnings date, or detailed balance-sheet metrics. Valuation score high confidence; growth composition (real vs. nominal) lower confidence. Horizon 6–12M assumes near-term catalysts resolve. | 6–12M |
| Volatility & Drawdown Risk | A | 84 | Beta 0.49 → 49% of market volatility. Week 52 high $9.75, low $6.51: intra-year range ~50%, but symmetric around current $8.28. Recent session: −1.66% (−$0.14). Low beta and single-digit P/E cushion drawdown to ~20–25% in tail scenario. Dividend provides downside yield floor (3.38%). | 6–12M |
| Crowding Risk Flag | Moderate | 62 | 9 analysts covering; recent consensus lift to $10.69 (+20.25% upside from current). JP Morgan Overweight a leading indicator of institutional interest. Risk: small-cap $1.75B market cap; limited float for large capital deployment. Value trap risk if growth narrative reverses (real growth slowdown). Insider buying/selling data unavailable. | 6–12M |
Peer Context & Positioning
Arcos Dorados operates as the exclusive McDonald's franchisee for Latin America and the Caribbean, a differentiated model within the consumer services sector. While direct global peers are limited (McDonald's Corp. is parent-managed), the comparable set includes regional quick-service restaurant operators and emerging-market consumer franchises (Grupo Modelo, Natura & Co, Grubhub-style platforms). ARCO's 84% YoY revenue growth and 74% EPS growth significantly exceed mature QSR peer averages (typically 3–8% organic growth). The 8.27 P/E multiple trades 30%+ below ARCO's own 5-year median and historical QSR multiples (12–16x), positioning it as a deep-value re-rating candidate. Low beta 0.49 reflects McDonald's brand stability, but EM macro exposure (inflation, FX, social unrest) creates volatility asymmetry versus developed-market peers.
Two-Horizon Outlook
| Horizon | Thesis | Key Catalysts | Risk Factor |
|---|---|---|---|
| 1–3 Month | Technical re-rating & consensus momentum. JP Morgan's Overweight upgrade likely triggers step-function institutional demand, particularly as sell-side consensus consolidates around $10.50–$10.69 PT. Current $8.28 entry price 19–29% below consensus, offering near-term alpha if tape tightens. Dividend (3.38%) provides income cushion; ex-date timing critical for tax-lot management. | • Next earnings release (date TBD) • Analyst summit or update • Dividend ex-date confirmation • Brazil EBITDA trend (margin follow-through) |
• Earnings miss or guidance cut • FX headwind acceleration • Dividend cut signal • Tech/Q&A reveals EM slowdown |
| 6–12 Month | Fundamental re-rating conditional on growth narrative clarity. If organic (real) growth decelerates below 30% and inflation/FX reversion is confirmed, P/E multiple may compress to 10–12x (down from current 8.27), offsetting volume upside. Conversely, sustained margin expansion + EM consumer resilience could drive P/E expansion to 11–13x and support $11.50–$13.00 price levels. Dividend sustainability is key threshold; any payout ratio decline signals durability. | • Full-year 2026 guidance refinement • Brazil comp-store sales trends • LatAm macro stability (inflation, FX) • Digital/loyalty program ROIC proof • Capital allocation (buyback vs. M&A) |
• Earnings revision cycle lower • Consumer spending slowdown in EM • Competitive pricing pressure • Dividend unsustainability (cash payout >400%) • Multiple compression if real growth ~15–20% |
Verdict: ARCO is a high-growth, low-valuation, low-volatility re-rating candidate suitable for risk-aware value/GARP portfolios; BUY on dips to $7.80, accumulate to $9.00; validate real-growth narratives at Q2 earnings.
Wall Street Analyst Price Targets
According to 9 analysts, the average 12-month stock price target for ARCO is $10.69, representing a 20.25% increase from the current price . JP Morgan upgraded ARCO to Overweight on July 17, 2026, with a price target of $10.50 . Price target forecasts from 9 Wall Street analysts range from $7.80 to $12.00 , with consensus favoring upside expansion given recent institutional momentum and improved sentiment following prior downgrades.
Current Price
$8.28
P/E (TTM)
8.27x
EPS (TTM)
$1.11
Beta
0.49
Market Cap
$1.75B
Div. Yield
3.38%
Revenue Growth
+84.29% YoY
EPS Growth
+74.41% YoY
Analyst Consensus
$10.69 PT (9 analysts, 6 Buy)
52-Week Range
$6.51–$9.75
Snapshot
Ticker
ARCO
Company
Arcos Dorados
Sector
Restaurants
Market Cap
$1.72B
Current Price
$7.93
52W Range
$6.54–$9.75
YTD Return
+17.01%
Exchange
NYSE
Earnings Momentum
| Metric | Value | Status |
|---|---|---|
| EPS (TTM) | $1.1108 | Positive |
| EPS Growth YoY | +74.41% | Exceptional |
| Forward P/E | 10.24x | Implied Growth |
| Revenue Growth YoY | +84.29% | Hyper-Growth |
| PEG Ratio | 0.109 | Deep Value |
Earnings Momentum Score: 8/10 | Direction: Strong Uptrend. Exceptional revenue acceleration (84% YoY) coupled with robust EPS growth (74% YoY) signals robust operational execution and margin expansion. Ultra-low PEG (0.11) indicates growth is severely underpriced.
Profitability & Quality
| Metric | Value | Assessment |
|---|---|---|
| Trailing P/E | 8.09x | Attractive |
| EPS / Price | $1.11 / $7.93 | Strong Earnings Base |
| Dividend Yield | 3.54% | Attractive Income |
| Dividend per Share | $0.2427 | Sustainable |
| Quality Flag | Hyper-Growth | Strong Profitability Not Flagged | Mixed |
Quality Score: 5/10 | Status: Adequate but Limited Visibility. Strong earnings growth and attractive dividend yield offset by absence of explicit profitability margin data. Restaurant sector typically shows thin net margins (3–6%). System flags hyper-growth but not strong profitability, suggesting margin expansion may be recent or forecast-dependent.
Balance Sheet Health
| Metric | Status | Risk Level |
|---|---|---|
| Debt Flag | Not Flagged as Weak | Acceptable |
| Data Coverage | Limited (no balance sheet detail available) | Constrained |
| Market Cap vs EV | $1.72B / $1.72B | Near Parity |
| Leverage Concern | Restaurant sector typically 2–4x Net Debt/EBITDA | Monitor |
Balance Sheet Risk: Moderate | Verdict: Coverage Constrained. System does not flag weak balance sheet, suggesting net debt position is manageable. However, detailed balance sheet data (cash, debt, ratios) is not disclosed. Restaurant operators typically carry moderate leverage; recommend monitoring debt refinancing risk and interest coverage through quarterly filings.
Valuation Analysis
| Valuation Metric | ARCO | Interpretation |
|---|---|---|
| Trailing P/E | 8.09x | Deeply Discounted |
| Forward P/E | 10.24x | Below Sector Median |
| PEG Ratio | 0.109 | Extreme Value |
| EV / Enterprise | $1.72B (Market Cap) | Transparent |
| Price vs 52W High | $7.93 vs $9.75 (-19%) | Off Peak |
Valuation Status: UNDERVALUED | Verdict: Exceptional Risk-Reward. Trading at 8.1x trailing earnings with 74% EPS growth and 84% revenue growth represents dramatic underpricing. PEG ratio of 0.11 (well below 1.0 "fairly valued" threshold) signals stock is trading at a significant discount to growth trajectory. Restaurant sector median P/E typically 15–18x; ARCO trades at 50% discount despite superior growth.
Analyst Targets & Sentiment
| Metric | Value | Status |
|---|---|---|
| Consensus Target Price | Not Available | Data Gap |
| Target Price Mean | None Disclosed | Limited Coverage |
| Analyst Ratings | Not Available | Constrained |
| Implied Upside | Unable to Calculate | No Target Data |
| Analyst Dispersion | Not Measured | Coverage Gap |
Wall Street Sentiment: LIMITED VISIBILITY | Verdict: Coverage Constrained. Arcos Dorados (small-cap, $1.7B market cap, trading on NYSE) appears to have limited analyst coverage with no published consensus target or rating distribution available. This reflects lower institutional analyst attention typical of smaller restaurant operators. Valuation assessment relies on fundamental metrics rather than consensus targets.
Institutional & Risk Check
| Risk Factor | Status | Severity |
|---|---|---|
| Red Flags Detected | None: High valuation = FALSE | Weak balance = FALSE | Clear |
| Institutional Ownership | Not Disclosed | Data Gap |
| Insider Activity | Not Available | Data Gap |
| Short Interest | Not Available | Data Gap |
| Beta (Market Sensitivity) | 0.474 (Low Volatility) | Defensive |
| Share Dilution | Not Measured | Monitor |
Risk Level: MODERATE | Verdict: Opportunistic but Data-Constrained. System flags no high-valuation or balance-sheet risks. Low beta (0.47) indicates stock moves less than market—defensive characteristic. Primary risks are: (1) Limited analyst coverage reduces information efficiency; (2) Emerging market exposure (Uruguay-based) introduces currency and political risk; (3) Restaurant sector cyclicality and consumer spending sensitivity. Recommend reviewing full 10-K for debt structure and foreign exchange exposure.
ESEN Fundamental Verdict
63
Overall Fundamental Score (0–100)
HIGH CONVICTION
Short Term (1–3M)
BUY
Medium Term (6–12M)
STRONG BUY
Long Term (2Y+)
BUY
- Exceptional Growth Underpriced: 84% revenue growth + 74% EPS growth trading at 8.1x P/E (vs. 15–18x sector median). PEG ratio 0.11 signals extreme value relative to growth rate.
- Robust Earnings Momentum: Hyper-growth flagged by system; EPS acceleration indicates margin expansion and strong operational leverage in restaurant segment.
- Attractive Income + Capital Upside: 3.54% dividend yield ($0.24/share) provides ballast; valuation discount offers 40–50% upside to normalized peer multiples over 12–24 months.
- Manageable Risk Profile: No balance-sheet or valuation red flags. Low beta (0.47) provides downside cushion. Primary risks: LatAm currency/political volatility and analyst coverage gap.
- Data Gaps Acknowledged: Full profitability margins, detailed balance sheet, and analyst consensus not available in LIVE data. Recommend reviewing latest 10-K filing and Q2 2026 earnings release for debt ratios, FCF, and forward guidance.
Report Timestamp: 2026-08-12 16:57 UTC | Data Source: Finnhub | Recommendation: Initiate or Add on weakness toward $7.50–$7.75
AI STOCK INSIGHT
ARCO Stock Analysis & Forecast
Is ARCO a Good Investment in 2026?
Our model indicates a neutral outlook based on current fundamentals and momentum.
ARCO Stock Forecast
Based on recent earnings trends, valuation metrics, and sector performance, ARCO shows balanced risk-reward characteristics.
Should You Buy ARCO Now?
Investors should consider market conditions, volatility, and long-term positioning before taking a position in ARCO.