Arcos Dorados Holdings Inc. Class A Shares (ARCO)

FairStock Score: 78/100 — HIGH CONVICTION

Key Financials

AI Analysis

AI-generated, general educational analysis — not personal investment advice.

Arcos Dorados is a McDonald's franchisee with exclusive rights in 21 Latin American and Caribbean markets. That brand association is a real competitive advantage: the menu, supply chain, and operating model are proven, and ARCO has scale in its territories. In the latest reported quarter, fiscal Q2 2026, revenue was $1.3B and net income was $45.0M, a 3.45% net margin. Profitability is thin, but FairStock calculates ROE at 36.36% and a Piotroski F-Score of 8/9. Still, ROCE is only 6.91%, so the business is not earning exceptional returns on total capital. The balance sheet demands caution. Debt-to-equity is 2.64, and the Altman Z-Score is 1.06, which points to elevated financial risk. Trailing free cash flow was $99.1M, a 5.0% FCF yield on the $2.0B market cap, and the dividend yield is 3.72%. At the 2026-10-13 close of $7.99, FairStock's P/E is 6.50, P/B is 2.03, EV/EBITDA is 7.87, and PEG is 0.07. The Graham Number is $10.46, implying a 23.61% margin of safety. The supplied growth figures are striking, but because no period is named, I treat them as directional. A beta of 0.49 suggests the shares have been less volatile than the market. This is a classic Graham setup: statistically cheap, with a durable brand and high returns on equity, offset by leverage, modest capital returns, and Latin American macro risk. The price already discounts many troubles. I would want the balance sheet and cash generation to hold before treating the discount as durable.

In plain English: Arcos Dorados runs McDonald's restaurants in 21 countries and territories in Latin America and the Caribbean. In its latest reported quarter, it earned $45 million on $1.3 billion of sales, and it pays a dividend. The stock looks cheap compared with its profits, but the company uses a lot of debt and operates in a region that can be economically unstable.

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Data as of 2026-10-13 close · note generated 2026-10-15 · model deepseek-flash

Fundamentals from company filings and market-data providers; prices are end-of-day, not real-time. AI-generated analysis is general and educational — not personal investment advice. Scoring methodology · Score test · Disclaimer