ARCO vs. CAVA: Which Stock Is the Better Value Option?

Core Insights - The article compares two stocks in the Retail - Restaurants sector: Arcos Dorados (ARCO) and Cava Group (CAVA), focusing on which stock is more appealing to value investors [1]. Valuation Metrics - Arcos Dorados has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while Cava Group has a Zacks Rank of 4 (Sell), suggesting a less favorable earnings outlook [3]. - ARCO's forward P/E ratio is 11.76, significantly lower than CAVA's forward P/E of 119.24, indicating that ARCO may be undervalued compared to CAVA [5]. - The PEG ratio for ARCO is 2.90, while CAVA's PEG ratio is 3.60, suggesting that ARCO has a more favorable valuation when considering expected earnings growth [5]. - ARCO's P/B ratio is 2.22, compared to CAVA's P/B of 10.69, further indicating that ARCO is more attractively priced relative to its book value [6]. - Based on these metrics, ARCO has received a Value grade of A, while CAVA has a Value grade of D, highlighting ARCO's stronger position as a value investment [6]. Earnings Outlook - ARCO is noted for its improving earnings outlook, which enhances its attractiveness in the Zacks Rank model, positioning it as the superior value option compared to CAVA [7].