Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. NEW YORK (TheStreet) -- Arcos Dorados Holdings (NYSE:ARCO) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and poor profit margins.
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- The share price of ARCOS DORADOS HOLDINGS INC has not done very well: it is down 10.17% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- ARCOS DORADOS HOLDINGS INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, ARCOS DORADOS HOLDINGS INC reported lower earnings of $0.54 versus $0.55 in the prior year. For the next year, the market is expecting a contraction of 18.5% in earnings ($0.44 versus $0.54).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 126.0% when compared to the same quarter one year ago, falling from $25.40 million to -$6.60 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, ARCOS DORADOS HOLDINGS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for ARCOS DORADOS HOLDINGS INC is rather low; currently it is at 15.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.67% is significantly below that of the industry average.
-- Written by a member of TheStreet Ratings Staff
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