Arcos Dorados Holdings Inc (NYSE:ARCO): Should The Future Outlook Worry You?
Looking at Arcos Dorados Holdings Inc’s (NYSE:ARCO) earnings update in June 2018, analyst forecasts seem bearish, with earnings expected to decline by -17% in the upcoming year against the past 5-year average growth rate of 33%. Presently, with latest-twelve-month earnings at US$94m, we should see this fall to US$78m by 2019. Below is a brief commentary around Arcos Dorados Holdings’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
See our latest analysis for Arcos Dorados Holdings
Exciting times ahead?
Longer term expectations from the 6 analysts covering ARCO’s stock is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of ARCO’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
By 2021, ARCO’s earnings should reach US$189m, from current levels of US$129m, resulting in an annual growth rate of 24%. EPS reaches $0.64 in the final year of forecast compared to the current $0.61 EPS today. Growth in earnings appears to be a result of cost cutting activities, as revenues is expected to grow much slower than earnings. Margins is currently sitting at 3.9%, which is expected to expand to 5.2% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Arcos Dorados Holdings, I’ve compiled three important factors you should look at:
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Valuation: What is Arcos Dorados Holdings worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Arcos Dorados Holdings is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Arcos Dorados Holdings? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
