Back to top

Image: Bigstock

Is Arcos Dorados (ARCO) Stock Undervalued Right Now?

Read MoreHide Full Article

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company value investors might notice is Arcos Dorados (ARCO - Free Report) . ARCO is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 16.62, while its industry has an average P/E of 22.43. ARCO's Forward P/E has been as high as 276.72 and as low as 15.28, with a median of 20.14, all within the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ARCO has a P/S ratio of 0.59. This compares to its industry's average P/S of 1.29.

Finally, investors will want to recognize that ARCO has a P/CF ratio of 9.02. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 14.52. Over the past year, ARCO's P/CF has been as high as 14.72 and as low as -283.26, with a median of 8.68.

Investors could also keep in mind Jack In The Box (JACK - Free Report) , an Retail - Restaurants stock with a Zacks Rank of # 2 (Buy) and Value grade of A.

Shares of Jack In The Box are currently trading at a forward earnings multiple of 10.80 and a PEG ratio of 0.64 compared to its industry's P/E and PEG ratios of 22.43 and 1.84, respectively.

JACK's Forward P/E has been as high as 17.79 and as low as 10.80, with a median of 13.27. During the same time period, its PEG ratio has been as high as 1.05, as low as 0.64, with a median of 0.78.

Furthermore, Jack In The Box holds a P/B ratio of -2.09 and its industry's price-to-book ratio is -16.89. JACK's P/B has been as high as -2.08, as low as -3.55, with a median of -2.58 over the past 12 months.

These are only a few of the key metrics included in Arcos Dorados and Jack In The Box strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, ARCO and JACK look like an impressive value stock at the moment.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Janus Henderson Sustainable & Impact Core Bond ETF (JACK) - free report >>

Arcos Dorados Holdings Inc. (ARCO) - free report >>

Published in