Strong On High Volume: Arcos Dorados Holdings (ARCO)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Arcos Dorados Holdings ( ARCO) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Arcos Dorados Holdings as such a stock due to the following factors:

  • ARCO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $5.0 million.
  • ARCO has traded 506,572 shares today.
  • ARCO is trading at 15.72 times the normal volume for the stock at this time of day.
  • ARCO is trading at a new high 7.02% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on ARCO:

Arcos Dorados Holdings Inc. operates as a franchisee of McDonald's restaurants. The stock currently has a dividend yield of 4.4%. Currently there are no analysts that rate Arcos Dorados Holdings a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Arcos Dorados Holdings has been 663,100 shares per day over the past 30 days. Arcos Dorados has a market cap of $708.4 million and is part of the services sector and leisure industry. Shares are down 55.8% year-to-date as of the close of trading on Thursday.

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TheStreet Quant Ratings rates Arcos Dorados Holdings as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • ARCOS DORADOS HOLDINGS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, ARCOS DORADOS HOLDINGS INC reported lower earnings of $0.25 versus $0.54 in the prior year. For the next year, the market is expecting a contraction of 300.0% in earnings (-$0.50 versus $0.25).
  • 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 98.8% when compared to the same quarter one year ago, falling from $19.58 million to $0.24 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, ARCOS DORADOS HOLDINGS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ARCOS DORADOS HOLDINGS INC is rather low; currently it is at 15.13%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.02% significantly trails the industry average.
  • Net operating cash flow has significantly decreased to $30.74 million or 61.12% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.


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