Arcos Dorados Holdings Inc Stock Upgraded (ARCO)

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 upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and a generally disappointing performance in the stock itself.

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Highlights from the ratings report include:
  • ARCO's revenue growth has slightly outpaced the industry average of 2.6%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • ARCO's debt-to-equity ratio of 0.88 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.73 is weak.
  • The gross profit margin for ARCOS DORADOS HOLDINGS INC is rather low; currently it is at 18.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.37% significantly trails the industry average.
  • Net operating cash flow has declined marginally to $100.33 million or 8.85% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ARCOS DORADOS HOLDINGS INC has marginally lower results.
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Arcos Dorados Holdings Inc. operates and franchises McDonald's restaurants. The company has a P/E ratio of 24.1, above the S&P 500 P/E ratio of 17.7. Arcos Dorados has a market cap of $1.72 billion and is part of the services sector and leisure industry. Shares are up 12.2% year to date as of the close of trading on Wednesday.

You can view the full Arcos Dorados Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

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.

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