Analyzing Arcos Dorados Holdings (ARCO) & Chipotle Mexican Grill (CMG)
Arcos Dorados Holdings (NYSE: ARCO) and Chipotle Mexican Grill (NYSE:CMG) are both retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, dividends, analyst recommendations and profitabiliy.
Insider & Institutional Ownership
41.0% of Arcos Dorados Holdings shares are held by institutional investors. Comparatively, 96.5% of Chipotle Mexican Grill shares are held by institutional investors. 2.0% of Chipotle Mexican Grill shares are held 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.
This is a summary of recent recommendations for Arcos Dorados Holdings and Chipotle Mexican Grill, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Arcos Dorados Holdings||0||0||2||0||3.00|
|Chipotle Mexican Grill||6||20||10||0||2.11|
Arcos Dorados Holdings currently has a consensus price target of $9.00, indicating a potential downside of 1.64%. Chipotle Mexican Grill has a consensus price target of $402.10, indicating a potential upside of 16.70%. Given Chipotle Mexican Grill’s higher probable upside, analysts clearly believe Chipotle Mexican Grill is more favorable than Arcos Dorados Holdings.
Valuation and Earnings
This table compares Arcos Dorados Holdings and Chipotle Mexican Grill’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Arcos Dorados Holdings||$3.05 billion||0.63||$278.00 million||$0.49||18.67|
|Chipotle Mexican Grill||$4.31 billion||2.28||$397.78 million||$4.74||72.69|
Chipotle Mexican Grill has higher revenue and earnings than Arcos Dorados Holdings. Arcos Dorados Holdings is trading at a lower price-to-earnings ratio than Chipotle Mexican Grill, indicating that it is currently the more affordable of the two stocks.
This table compares Arcos Dorados Holdings and Chipotle Mexican Grill’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Arcos Dorados Holdings||3.39%||28.58%||6.92%|
|Chipotle Mexican Grill||3.17%||10.65%||7.38%|
Risk and Volatility
Arcos Dorados Holdings has a beta of 2.16, indicating that its stock price is 116% more volatile than the S&P 500. Comparatively, Chipotle Mexican Grill has a beta of 0.62, indicating that its stock price is 38% less volatile than the S&P 500.
Chipotle Mexican Grill beats Arcos Dorados Holdings on 10 of the 14 factors compared between the two stocks.
Arcos Dorados Holdings Company Profile
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.
Chipotle Mexican Grill Company Profile
Chipotle Mexican Grill, Inc. (Chipotle), together with its subsidiaries, operates Chipotle Mexican Grill restaurants. The Company’s Chipotle Mexican Grill restaurants serve a menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads. As of December 31, 2016, the Company managed its operations and restaurants based on 11 regions. As of December 31, 2016, the Company operated 2,198 Chipotle restaurants throughout the United States, as well as 29 international Chipotle restaurants, and it also had 23 restaurants in operation in other non-Chipotle concepts. As of December 31, 2016, 29 of its restaurants were located outside of the United States, with 17 in Canada, six in the United Kingdom, five in France and one in Frankfurt, Germany. The Company sells gift cards, which do not have an expiration date. The Company categorizes its restaurants as end-caps (at the end of a line of retail outlets), in-lines (in a line of retail outlets), free-standing or other.
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