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Are Investors Undervaluing Arcos Dorados (ARCO) Right Now?

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While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

Arcos Dorados (ARCO - Free Report) is a stock many investors are watching right now. ARCO is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 13.24, which compares to its industry's average of 24.96. Over the past year, ARCO's Forward P/E has been as high as 21.67 and as low as 11.89, with a median of 14.23.

We also note that ARCO holds a PEG ratio of 1.14. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ARCO's PEG compares to its industry's average PEG of 1.85. ARCO's PEG has been as high as 1.47 and as low as 0.36, with a median of 0.56, all within the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. ARCO has a P/S ratio of 0.53. This compares to its industry's average P/S of 1.14.

Finally, our model also underscores that ARCO has a P/CF ratio of 7.07. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 20.49. Over the past year, ARCO's P/CF has been as high as 10.44 and as low as 5.73, with a median of 6.85.

Investors could also keep in mind Bloomin' Brands (BLMN - Free Report) , an Retail - Restaurants stock with a Zacks Rank of # 2 (Buy) and Value grade of A.

Furthermore, Bloomin' Brands holds a P/B ratio of 10.27 and its industry's price-to-book ratio is -21.07. BLMN's P/B has been as high as 10.27, as low as 4.92, with a median of 7.36 over the past 12 months.

Value investors will likely look at more than just these metrics, but the above data helps show that Arcos Dorados and Bloomin' Brands are likely undervalued currently. And when considering the strength of its earnings outlook, ARCO and BLMN sticks out as one of the market's strongest value stocks.


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Bloomin' Brands, Inc. (BLMN) - free report >>

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