Arcos Dorados Holdings (NYSE: ARCO) and Wendy’s Company (The) (NASDAQ:WEN) are both mid-cap retail/wholesale companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, valuation, earnings, profitability, institutional ownership, risk and dividends.
Wendy’s Company (The) pays an annual dividend of $0.28 per share and has a dividend yield of 1.9%. Arcos Dorados Holdings does not pay a dividend. Wendy’s Company (The) pays out 75.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Arcos Dorados Holdings has raised its dividend for 3 consecutive years.
Risk & 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, Wendy’s Company (The) has a beta of 1, indicating that its stock price has a similar volatility profile to the S&P 500.
Valuation and Earnings
This table compares Arcos Dorados Holdings and Wendy’s Company (The)’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Arcos Dorados Holdings||$3.16 billion||0.64||$249.87 million||$0.26||37.12|
|Wendy’s Company (The)||$1.28 billion||2.84||$385.41 million||$0.37||40.35|
Wendy’s Company (The) has higher revenue, but lower earnings than Arcos Dorados Holdings. Arcos Dorados Holdings is trading at a lower price-to-earnings ratio than Wendy’s Company (The), indicating that it is currently the more affordable of the two stocks.
This table compares Arcos Dorados Holdings and Wendy’s Company (The)’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%|
|Wendy’s Company (The)||7.68%||19.67%||2.71%|
Institutional and Insider Ownership
36.7% of Arcos Dorados Holdings shares are held by institutional investors. Comparatively, 76.5% of Wendy’s Company (The) shares are held by institutional investors. 26.5% of Wendy’s Company (The) shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.
This is a breakdown of recent recommendations and price targets for Arcos Dorados Holdings and Wendy’s Company (The), as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Arcos Dorados Holdings||0||0||3||0||3.00|
|Wendy’s Company (The)||0||9||7||0||2.44|
Arcos Dorados Holdings presently has a consensus price target of $9.53, suggesting a potential downside of 1.21%. Wendy’s Company (The) has a consensus price target of $15.57, suggesting a potential upside of 4.30%. Given Wendy’s Company (The)’s higher possible upside, analysts plainly believe Wendy’s Company (The) is more favorable than Arcos Dorados Holdings.
Wendy’s Company (The) beats Arcos Dorados Holdings on 11 of the 17 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.
Wendy’s Company (The) Company Profile
The Wendy’s Company is the parent company of subsidiary holding company Wendy’s Restaurants, LLC (Wendy’s Restaurants). Wendy’s Restaurants is the parent company of Wendy’s International, LLC (Wendy’s), which is the owner and franchisor of the Wendy’s restaurant system in the United States. Wendy’s is a restaurant company specializing in the hamburger sandwich segment. Wendy’s is engaged in the business of operating, developing and franchising a system of restaurants serving food. The Company operated approximately 6,080 Wendy’s restaurants in operation in North America, as of January 1, 2017. Of these restaurants, 330 were operated by the Company and 5,768 by a total of 376 franchisees, as of January 1, 2017. In addition, as of January 1, 2017, there were 439 franchised Wendy’s restaurants in operation in 29 countries and territories other than North America. Wendy’s is also a partner in a restaurant real estate joint venture with a subsidiary of Restaurant Brands International Inc.
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