Value
9.1/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 9.5 |
| P/S | 10.0 |
| EV/EBITDA | 8.2 |
| Fwd P/E | 9.4 |
| PEG | 10.0 |
| Analyst target | 7.5 |
- ▸Forward P/E: 9.5x
- ▸PEG: 0.06
- ▸Attractively valued
ARCO · Why this verdict
Why Arcos Dorados Holdings (ARCO) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
Show full disclosure ▾Hide full disclosure ▴
About TrendMatrix. TrendMatrix is a publisher of general securities research and market commentary. We publish on a regular schedule. All content is the same for every subscriber in a tier — we do not provide personalized investment advice and we do not take into account any individual subscriber's financial situation, investment objectives, risk tolerance, tax situation, or holdings.
Not investment advice. TrendMatrix is not a registered investment adviser. Our content is for informational and educational purposes only. Consult your own licensed investment adviser, broker, or tax professional before making any investment decision.
Conflicts and positions. The TrendMatrix editorial team frequently holds personal long-term positions in securities discussed. We disclose positions held at the time of publication on each piece. We maintain a trading-window policy: we do not initiate or close positions in the same direction as a TrendMatrix publication within 24 hours before or 72 hours after publication.
No paid promotion. TrendMatrix does not accept payment from any issuer, broker, or third party in exchange for coverage of any security. Our sole compensation is subscription revenue.
No fiduciary duty. No fiduciary, advisory, or agency relationship is created between you and TrendMatrix by reading our content or subscribing to our service.
Performance. Past performance is not indicative of future results. Performance figures reflect the published model only and do not reflect any individual subscriber's actual results.
VerdictSELL
Overall score6.4/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
An attractively valued restaurant operator screens cheap versus peers on virtually every metric, has beaten earnings estimates in 3 of the last 4 quarters with an average surprise well above expectations, and has broken out technically — but elevated leverage and a reward-to-risk ratio that narrowly misses the ideal entry threshold argue for patience before adding size.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The company has beaten earnings estimates in 3 of the last 4 quarters, with an average surprise across all four periods of roughly 133% — a delivery track record that signals management is either under-promising or the business is genuinely outperforming expectations on a recurring basis. Catalyst breakdown | Earnings beats should continue for at least 2 of the next 4 quarters, with average surprises remaining positive, to confirm that the pattern is structural rather than driven by one outsized quarter. | →Stable |
| CounterThe most recent quarter was a miss of roughly 36% below estimates, which broke a prior streak of strong beats; one poor delivery could indicate that the earlier outperformance reflected timing or one-time items rather than sustainable execution. | ||
A debt-to-equity ratio of 2.8 carries a leverage penalty that limits the quality score and reduces the margin of safety — elevated debt means a smaller cushion if cash flow softens, and constrains the company's flexibility to invest in growth or return capital to shareholders. Bear case | Debt-to-equity should trend below 2.0x over the next 12-18 months through earnings-driven deleveraging; a ratio remaining above 2.5x would indicate the leverage headwind is persisting. | →Stable |
| CounterThe ROE of 36% is exceptional and suggests the leverage is generating returns well above its cost; if the business continues to compound at that rate, the debt load may be a deliberate and productive financial structure rather than a liability. | ||
The stock trades at a forward multiple of 10.2x with a PEG ratio of 0.06 and screens attractively valued against peers — an unusually low growth-adjusted multiple that implies the market is discounting the earnings power well below what the operational trajectory warrants. Valuation breakdown | Over 12 months, the forward multiple should re-rate toward 13-15x as earnings delivery continues, with analyst consensus upside of approximately 26% serving as a near-term price anchor. | →Stable |
| CounterA low PEG and cheap multiple relative to peers can persist if the market perceives structural risks — including leverage at a debt-to-equity ratio of 2.8 — that constrain the quality of earnings and dampen re-rating potential. | ||
The stock has formed a golden cross — the short-term moving average crossing above the long-term — is trading above all key moving averages with bullish momentum indicators and rising on-balance volume, presenting a technical breakout setup that tends to attract additional institutional buying. Momentum breakdown | The stock should hold above its 200-day moving average and on-balance volume should continue rising over the next 12 months; a failure to hold the breakout level within 4 weeks would indicate a false breakout. | →Stable |
| CounterVolume on the breakout appears thin relative to the price move, and the RSI at 51 is not particularly strong for a claimed breakout — a narrow-volume breakout is more susceptible to reversal if any negative news emerges. | ||
The company has beaten earnings estimates in 3 of the last 4 quarters, with an average surprise across all four periods of roughly 133% — a delivery track record that signals management is either under-promising or the business is genuinely outperforming expectations on a recurring basis.
→StableCatalyst breakdown
- Expectation
- Earnings beats should continue for at least 2 of the next 4 quarters, with average surprises remaining positive, to confirm that the pattern is structural rather than driven by one outsized quarter.
CounterThe most recent quarter was a miss of roughly 36% below estimates, which broke a prior streak of strong beats; one poor delivery could indicate that the earlier outperformance reflected timing or one-time items rather than sustainable execution.
A debt-to-equity ratio of 2.8 carries a leverage penalty that limits the quality score and reduces the margin of safety — elevated debt means a smaller cushion if cash flow softens, and constrains the company's flexibility to invest in growth or return capital to shareholders.
→StableBear case
- Expectation
- Debt-to-equity should trend below 2.0x over the next 12-18 months through earnings-driven deleveraging; a ratio remaining above 2.5x would indicate the leverage headwind is persisting.
CounterThe ROE of 36% is exceptional and suggests the leverage is generating returns well above its cost; if the business continues to compound at that rate, the debt load may be a deliberate and productive financial structure rather than a liability.
The stock trades at a forward multiple of 10.2x with a PEG ratio of 0.06 and screens attractively valued against peers — an unusually low growth-adjusted multiple that implies the market is discounting the earnings power well below what the operational trajectory warrants.
→StableValuation breakdown
- Expectation
- Over 12 months, the forward multiple should re-rate toward 13-15x as earnings delivery continues, with analyst consensus upside of approximately 26% serving as a near-term price anchor.
CounterA low PEG and cheap multiple relative to peers can persist if the market perceives structural risks — including leverage at a debt-to-equity ratio of 2.8 — that constrain the quality of earnings and dampen re-rating potential.
The stock has formed a golden cross — the short-term moving average crossing above the long-term — is trading above all key moving averages with bullish momentum indicators and rising on-balance volume, presenting a technical breakout setup that tends to attract additional institutional buying.
→StableMomentum breakdown
- Expectation
- The stock should hold above its 200-day moving average and on-balance volume should continue rising over the next 12 months; a failure to hold the breakout level within 4 weeks would indicate a false breakout.
CounterVolume on the breakout appears thin relative to the price move, and the RSI at 51 is not particularly strong for a claimed breakout — a narrow-volume breakout is more susceptible to reversal if any negative news emerges.
Per-dimension breakdown
Quality
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 4.5 |
| Gross margin | 0.0 |
| Op margin | 2.1 |
| Net margin | 2.4 |
| Current ratio | 3.2 |
| FCF quality | 5.9 |
| Moat | 6.0 |
| Piotroski F | 6.7 |
- ▸Excellent ROE: 36%
- ▸Earnings quality warning: 78% FCF/NI
Growth
7.8/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.7 |
| EPS growth | 10.0 |
Momentum
2.8/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 3.4 |
| OBV | 1.0 |
| MA position | 4.0 |
| Volume | 0.0 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
7.1/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 6.9 |
| Price target | 9.0 |
| erm sentiment | 5.0 |
- ▸Light analyst coverage (9.0) — signal dampened
- ▸Analyst upside: 36%
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.0 |
- ▸Insider selling (low materiality) — $180,200 (0.010% of mkt cap)
Peer rank
6.6/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 9.2 |
| quality rank | 4.6 |
| growth rank | 7.5 |
- ▸Attractive P/E vs peers
Technical
7.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 7.4 |
| support resistance | 8.0 |
| 52w position | 6.9 |
Risk (lower is worse)
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.2 |
| days to cover | 7.9 |
| volatility | 4.9 |
| put call | 10.0 |
| implied vol | 4.1 |
| max pain risk | 3.0 |
| beta | 10.0 |
| debt equity | 2.2 |
- ▸Above max pain $2
Catalyst
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| dividend safety | 6.0 |
- ▸Strong earnings: 3B/1M
- ▸Dividend: 342.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- ASYMMETRY:3.0>=1.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:55d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- MOMENTUM:2.8<4.5
Warning (0)
none
Reward-to-Risk
3.02
Upside
+18.4%
Downside
6.1%
Sizing output
AVOID
SetupUNKNOWN — No clear chart pattern; technical signals are mixed
EdgeNO_EDGE — No clear edge identified
SuitabilityAGGRESSIVE — MCap $1.7B<$5B
Investment implication
The F-path SELL output reflects an overall score of 4.9 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 9.1) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:2.8<4.5) reinforce the read. Current asymmetry R:R is 3.02 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 9.1, Growth at 7.8, and Technical at 7.4; the weakest are Momentum at 2.8, Quality at 4.5, and Insider at 5.0. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of 3.02 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1The stock trades at a forward multiple of 10.2x with a PEG ratio of 0.06 and screens attractively valued against peers — an unusually low growth-adjusted multiple that implies the market is discounting the earnings power well below what the operational trajectory warrants.
Trip ifForward P/E multiple expands above 14x, reducing the discount to peers to less than 10%.
- P2The company has beaten earnings estimates in 3 of the last 4 quarters, with an average surprise across all four periods of roughly 133% — a delivery track record that signals management is either under-promising or the business is genuinely outperforming expectations on a recurring basis.
Trip ifEPS surprise falls below 0% for 2 consecutive quarters.
- P3The stock has formed a golden cross — the short-term moving average crossing above the long-term — is trading above all key moving averages with bullish momentum indicators and rising on-balance volume, presenting a technical breakout setup that tends to attract additional institutional buying.
Trip ifPrice falls below the 200-day moving average and stays below it for more than 4 consecutive weeks.
- P4A debt-to-equity ratio of 2.8 carries a leverage penalty that limits the quality score and reduces the margin of safety — elevated debt means a smaller cushion if cash flow softens, and constrains the company's flexibility to invest in growth or return capital to shareholders.
Trip ifDebt-to-equity ratio falls below 2.0x for 2 consecutive reporting periods.