Head-To-Head Comparison: Arcos Dorados (ARCO) & Diversified Restaurant (SAUC)

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Arcos Dorados (NYSE: ARCO) and Diversified Restaurant (NASDAQ:SAUC) are both small-cap retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, earnings, valuation, profitability, risk and dividends.

Profitability

This table compares Arcos Dorados and Diversified Restaurant’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arcos Dorados 2.63% 19.72% 5.33%
Diversified Restaurant -13.13% -4.31% -1.60%

Earnings & Valuation

This table compares Arcos Dorados and Diversified Restaurant’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Arcos Dorados $3.32 billion 0.45 $129.16 million $0.61 11.72
Diversified Restaurant $165.46 million 0.20 -$20.45 million ($0.05) -24.40

Arcos Dorados has higher revenue and earnings than Diversified Restaurant. Diversified Restaurant is trading at a lower price-to-earnings ratio than Arcos Dorados, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

37.6% of Arcos Dorados shares are held by institutional investors. Comparatively, 10.7% of Diversified Restaurant shares are held by institutional investors. 50.0% of Diversified Restaurant shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Volatility and Risk

Arcos Dorados has a beta of 1.79, meaning that its stock price is 79% more volatile than the S&P 500. Comparatively, Diversified Restaurant has a beta of 1.19, meaning that its stock price is 19% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and price targets for Arcos Dorados and Diversified Restaurant, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arcos Dorados 0 0 2 0 3.00
Diversified Restaurant 0 0 0 0 N/A

Arcos Dorados currently has a consensus price target of $11.30, suggesting a potential upside of 58.04%. Given Arcos Dorados’ higher possible upside, equities research analysts plainly believe Arcos Dorados is more favorable than Diversified Restaurant.

Dividends

Arcos Dorados pays an annual dividend of $0.10 per share and has a dividend yield of 1.4%. Diversified Restaurant does not pay a dividend. Arcos Dorados pays out 16.4% of its earnings in the form of a dividend.

Summary

Arcos Dorados beats Diversified Restaurant on 13 of the 15 factors compared between the two stocks.

About Arcos Dorados

Arcos Dorados Holdings Inc. operates as a franchisee of McDonald's restaurants. It has the exclusive right to own, operate, and grant franchises of McDonald's restaurants in 20 countries and territories in Latin America and the Caribbean, including Argentina, Aruba, Brazil, Chile, Colombia, Costa Rica, Curaçao, Ecuador, French Guiana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto Rico, Trinidad and Tobago, Uruguay, the United States Virgin Islands of St. Croix and St. Thomas, and Venezuela. As of April 27, 2018, the company operated or franchised approximately 2,100 McDonald's-branded restaurants. Arcos Dorados Holdings Inc. was founded in 2007 and is based in Montevideo, Uruguay.

About Diversified Restaurant

Diversified Restaurant Holdings, Inc., a restaurant company, operates Buffalo Wild Wings franchised restaurants in the United States. The company primarily offers fresh bone-in chicken wings, frozen boneless chicken, and potatoes. As of March 8, 2018, it operated 65 franchised restaurants in Florida, Illinois, Indiana, Michigan, and Missouri. The company was founded in 1999 and is headquartered in Southfield, Michigan.

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