Arcos Dorados Holdings (ARCO) AI Stock Analysis

• Market Cap: $1.41B
• Dividend Yield: 3.6%
• Average Volume (3M): 1.21M
• Price to Earnings (P/E): 10.8
• Beta (1Y): 0.44
• Revenue Growth: 0.09%
• EPS Growth: -23.74%
• Country: US
• Employees: 100,000
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Restaurants
• EPS (TTM): 0.11
• Shares Outstanding: 130,663,060
• 10 Day Avg. Volume: 1,174,100
• 30 Day Avg. Volume: 1,210,386
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 2.45
• Enterprise Value/Revenue: 0.77
• Enterprise Value/Gross Profit: 5.88
• Enterprise Value/Ebitda: 7.18
• 1Y Price Target: $8.63
• Price Target Upside: 29.58% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 3

• Rating: 67 Neutral
• Price Target: $7.50 ▲(12.61% Upside)

Arcos Dorados Holdings' overall score is driven by strong earnings call insights and a favorable valuation. However, financial performance is tempered by high debt and cash flow challenges, while technical indicators suggest caution.

Positive Factors

Revenue Growth

Strong revenue growth indicates robust market demand and effective sales strategies, supporting long-term business expansion.

Digital Sales Penetration

High digital sales penetration enhances customer engagement and operational efficiency, providing a durable competitive edge.

Investment Grade Rating

Achieving investment grade status reflects financial stability and enhances credibility, supporting future capital access and growth.

Negative Factors

High Debt Levels

High debt levels can strain financial flexibility and increase risk, potentially impacting long-term financial health if not managed.

Decline in Net Income

A decline in net income highlights challenges in managing operating costs, which could affect profitability and strategic investments.

Challenging Consumer Environment in Brazil

Economic challenges in key markets like Brazil can limit growth potential and pressure margins, affecting overall performance.

Arcos Dorados Holdings Business Overview & Revenue Model

Company Description

Arcos Dorados Holdings Inc. operates as a franchisee of McDonald's restaurants. The company 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. As of December 31, 2021, it operated or franchised 2,261 restaurants. The company was founded in 2007 and is based in Montevideo, Uruguay.

How the Company Makes Money

Arcos Dorados generates revenue primarily through the operation of its McDonald's franchises, which includes sales from food and beverages in its restaurants. The company earns income through both company-operated restaurants and franchised locations, with a significant portion of revenue derived from franchise fees and royalties. Additional revenue streams include partnerships with suppliers for promotional items and branded merchandise, as well as co-branding initiatives that enhance customer engagement. The company's focus on digital transformation, including mobile ordering and delivery services, has also contributed to increased sales and customer loyalty, further solidifying its financial performance.

Arcos Dorados Holdings Financial Statement Overview

Summary

Arcos Dorados Holdings shows stable revenue growth and solid profit margins, with effective equity use. However, high debt levels and negative free cash flow pose potential risks.

Income Statement

Arcos Dorados Holdings shows a stable revenue growth trend, with a 3.19% increase from the previous year. The company maintains a healthy gross profit margin of 13.12% and a net profit margin of 3.33%, though the latter has decreased compared to the prior year. EBIT and EBITDA margins are at 7.26% and 11.25%, respectively, indicating operational efficiency. The consistent revenue increase and profitability margins suggest a positive trajectory, albeit with a slight decline in profitability.

Balance Sheet

The balance sheet reflects a moderate financial structure with a debt-to-equity ratio of 3.39, suggesting a higher reliance on debt financing. Return on Equity (ROE) is 29.27%, showing effective use of equity to generate profit, though it has decreased from the previous year. The equity ratio stands at 17.57%, indicating a lower proportion of assets financed by equity. While the company shows strong ROE, the high debt levels could pose a risk if not managed carefully.

Cash Flow

Arcos Dorados Holdings experienced a decline in operating cash flow and free cash flow, resulting in a negative free cash flow of -60.79 million. The operating cash flow to net income ratio is 1.79, indicating adequate cash generation from operations relative to net income. However, the free cash flow to net income ratio is negative, highlighting challenges in cash retention. These cash flow challenges could impact liquidity if not addressed.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	4.47B	4.33B	3.62B	2.66B	1.98B
Gross Profit	586.42M	597.14M	2.59B	324.06M	115.44M
EBITDA	502.88M	459.66M	386.25M	244.69M	51.51M
Net Income	148.76M	181.27M	140.34M	45.49M	-149.39M
Balance Sheet
Total Assets	2.89B	3.02B	2.64B	2.36B	2.29B
Cash, Cash Equivalents and Short-Term Investments	138.59M	246.77M	304.40M	278.83M	165.99M
Total Debt	1.72B	1.69B	1.56B	1.53B	1.61B
Total Liabilities	2.38B	2.50B	2.31B	2.14B	2.10B
Stockholders Equity	508.08M	515.28M	323.62M	220.43M	197.55M
Cash Flow
Free Cash Flow	-60.79M	21.87M	128.32M	143.04M	-70.34M
Operating Cash Flow	266.85M	381.96M	345.44M	258.04M	15.97M
Investing Cash Flow	-280.33M	-380.35M	-259.65M	-108.28M	-88.71M
Financing Cash Flow	-37.16M	-11.82M	-59.98M	-17.93M	126.01M

Arcos Dorados Holdings Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 6.66
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ARCO, the sentiment is Negative. The current price of 6.66 is below the 20-day moving average (MA) of 6.83, below the 50-day MA of 6.90, and below the 200-day MA of 7.37, indicating a bearish trend. The MACD of -0.05 indicates Positive momentum. The RSI at 41.79 is Neutral, neither overbought nor oversold. The STOCH value of 16.97 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ARCO.

Arcos Dorados Holdings Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DPZ	71 Outperform	$14.54B	24.86	-15.02%	1.56%	3.65%	5.71%
MCD	68 Neutral	$214.45B	25.74	-304.06%	2.36%	1.17%	2.09%
ARCO	67 Neutral	$1.41B	10.83	24.80%	3.60%	0.09%	-23.74%
YUM	66 Neutral	$42.52B	30.26	-18.65%	1.85%	11.30%	-7.82%
WEN	63 Neutral	$1.79B	9.87	170.14%	8.29%	1.31%	-1.46%
PZZA	60 Neutral	$1.57B	21.26	-17.38%	3.84%	-1.46%	8.10%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%

Arcos Dorados Holdings Corporate Events

Arcos Dorados Reports Decline in Net Income for First Half of 2025

Arcos Dorados Holdings Inc. reported its unaudited financial results for the six-month period ending June 30, 2025. The company saw a slight increase in total revenues to $2.22 billion compared to $2.19 billion in the same period last year. However, net income attributable to Arcos Dorados Holdings decreased to $36.52 million from $55.14 million in the previous year, reflecting challenges in operating costs and expenses. This financial performance indicates a need for strategic adjustments to enhance profitability amidst rising costs.

Arcos Dorados Reports Strong Q2 2025 Financial Results Amid Strategic Expansion

Arcos Dorados Holdings reported its second-quarter 2025 financial results, highlighting a 12.1% growth in systemwide comparable sales and total revenues of $1.1 billion. The company’s digital channels contributed significantly, with digital sales accounting for over 60% of total sales. The Loyalty Program expanded to 21.5 million members across six markets, enhancing customer engagement. Despite challenging consumer dynamics in Brazil, the company’s diversified business model and strategic marketing initiatives, such as the Big Fest and Formula 1 promotions, drove strong profitability and brand preference. The company opened 20 new Experience of the Future restaurants and plans to expand into its 21st market, Saint Martin, demonstrating its commitment to growth in the region.

Arcos Dorados Achieves Full Investment Grade Status with S&P Rating

On July 31, 2025, Arcos Dorados Holdings Inc. announced that S&P Global Ratings has assigned it an investment grade long-term issuer credit rating of ‘BBB-‘ with a Stable Outlook, marking the company’s achievement of full investment grade status. This follows a similar upgrade by Fitch Ratings in January 2025. The ratings reflect Arcos Dorados’ leading position in the quick service restaurant industry in Latin America, its exclusive rights to the McDonald’s brand, and its strong financial profile. The renewed Master Franchise Agreement with McDonald’s, valid through 2044, further strengthens its strategic position, offering significant competitive advantages. The company’s robust liquidity, broad geographic footprint, and prudent financial management are also highlighted as key strengths, enhancing its standing in global capital markets.