Unlocking Growth: Why Arcos Dorados Belongs in Your Portfolio

Core Viewpoint - Arcos Dorados is positioned as a leading player in the Latin American QSR industry, benefiting from a growing market and economic strength in the region, which supports its expansion opportunities [1][2]. Company Performance - Arcos Dorados reported a 6.7% top-line growth, significantly outperforming its parent company McDonald's by over 670 basis points and exceeding analyst consensus estimates by 470 basis points [3][4]. - The systemwide comparable sales increased by 40.8%, with a 10.2% growth when adjusted for inflation in Argentina, driven by digital channels that accounted for 57% of revenue [4]. - Despite the growth, net income decreased compared to the previous year, and earnings per share remained flat due to one-off costs, although the company maintained a strong cash flow to support its balance sheet [4]. Market Position and Valuation - Arcos Dorados trades at a P/E ratio of 12.40, which is significantly lower than McDonald's, providing a value opportunity for investors [5]. - The company has a dividend yield of 2.39% and pays out less than 30% of its earnings, compared to McDonald's 55%, indicating a potentially robust distribution growth outlook [5]. Technical Outlook - The stock is currently in an uptrend, but there is a risk of a deeper correction if it fails to break through resistance at the 150-day EMA, with potential support levels at $9.00 and $7.50 [6]. - The expectation is that the stock will continue its upward trajectory, possibly reaching new highs in early 2025 [6].