Value
9.5/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 9.8 |
| P/S | 10.0 |
| EV/EBITDA | 8.5 |
| Fwd P/E | 9.6 |
| PEG | 10.0 |
| Analyst target | 9.0 |
- ▸Forward P/E: 8.1x
- ▸PEG: 0.08
- ▸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. How we score · Editorial policy
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VerdictSELL
Overall score6.3/10
ConfidenceHIGH
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
Arcos Dorados combines a forward P/E of 7.7x, a 3-of-4 earnings beat streak and 40% upside to the analyst target with weak momentum, leverage and below-average quality, so it is a speculative catalyst play around the November 12 report.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The company beat estimates in 3 of the last 4 quarters, including a 45% beat in the latest report, with earnings due November 12. Earnings | The November 12 report extends the beat streak to 4 of 5. | →Stable |
| CounterThe beats are against low estimates (0.10-0.15 per share) and a 35.7% miss in March shows results are volatile. | ||
Debt-to-equity of 2.6 triggers a leverage penalty, compounded by a consumer-discretionary sector modifier of -1.5 and a put/call ratio of 16.67. Bear case | Leverage declines below 2.0 and options positioning normalizes. | ↓Deteriorating |
| CounterThe 4.2% dividend yield with dividend safety of 8.5 suggests cash flow comfortably supports the debt load. | ||
Forward P/E of 7.7x and a PEG of 0.08 sit alongside 40.1% upside to the $9.43 analyst target and reward-to-risk of 5.05. Valuation breakdown | Price rises toward the $9.43 analyst target. | →Stable |
| CounterLight analyst coverage dampens the signal, so the 61% analyst upside may rest on few estimates. | ||
Return on equity is an excellent 36%, but FCF is only 50% of net income, a warning on earnings quality. Quality breakdown | ROE stays above 30% and FCF/net income rises above 80%. | →Stable |
| CounterHigh ROE is partly driven by leverage (debt-to-equity penalty at 2.6), so it may overstate underlying profitability. | ||
Momentum scores 2.0 with RSI at 28, price below its 200-day average and falling OBV, indicating capitulation-style selling. Momentum breakdown | RSI recovers above 40 and price reclaims the 200-day average. | ↑Improving |
| CounterThe 200-day average is still rising (+0.6%/30d), so this may be a pullback within an uptrend rather than a new downtrend. | ||
The company beat estimates in 3 of the last 4 quarters, including a 45% beat in the latest report, with earnings due November 12.
→StableEarnings
- Expectation
- The November 12 report extends the beat streak to 4 of 5.
CounterThe beats are against low estimates (0.10-0.15 per share) and a 35.7% miss in March shows results are volatile.
Debt-to-equity of 2.6 triggers a leverage penalty, compounded by a consumer-discretionary sector modifier of -1.5 and a put/call ratio of 16.67.
↓DeterioratingBear case
- Expectation
- Leverage declines below 2.0 and options positioning normalizes.
CounterThe 4.2% dividend yield with dividend safety of 8.5 suggests cash flow comfortably supports the debt load.
Forward P/E of 7.7x and a PEG of 0.08 sit alongside 40.1% upside to the $9.43 analyst target and reward-to-risk of 5.05.
→StableValuation breakdown
- Expectation
- Price rises toward the $9.43 analyst target.
CounterLight analyst coverage dampens the signal, so the 61% analyst upside may rest on few estimates.
Return on equity is an excellent 36%, but FCF is only 50% of net income, a warning on earnings quality.
→StableQuality breakdown
- Expectation
- ROE stays above 30% and FCF/net income rises above 80%.
CounterHigh ROE is partly driven by leverage (debt-to-equity penalty at 2.6), so it may overstate underlying profitability.
Momentum scores 2.0 with RSI at 28, price below its 200-day average and falling OBV, indicating capitulation-style selling.
↑ImprovingMomentum breakdown
- Expectation
- RSI recovers above 40 and price reclaims the 200-day average.
CounterThe 200-day average is still rising (+0.6%/30d), so this may be a pullback within an uptrend rather than a new downtrend.
Per-dimension breakdown
Quality
4.4/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 4.6 |
| Gross margin | 0.0 |
| Op margin | 2.2 |
| Net margin | 2.6 |
| Current ratio | 3.5 |
| FCF quality | 4.0 |
| Moat | 6.0 |
| Piotroski F | 6.7 |
- ▸Excellent ROE: 36%
- ▸Earnings quality warning: 50% FCF/NI
Growth
8.1/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 6.1 |
| EPS growth | 10.0 |
Momentum
3.5/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.0 |
| MACD | 2.5 |
| OBV | 10.0 |
| MA position | 2.2 |
| Volume | 0.0 |
- ▸Capitulation risk (RSI 28, below 200MA)
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA but MA still rising (+0.5%/30d) — pullback in uptrend, not confirmed weakness
Sentiment
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 6.9 |
| Price target | 9.6 |
| erm sentiment | 3.7 |
- ▸Light analyst coverage (9.0) — signal dampened
- ▸Analyst upside: 55%
Insider
3.9/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 3.6 |
| notable moves | 3.0 |
- ▸Insider selling (low materiality) — $262,259 (0.018% of mkt cap)
Peer rank
6.4/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 9.5 |
| quality rank | 5.7 |
| growth rank | 8.0 |
- ▸Attractive P/E vs peers
Technical
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 7.3 |
| support resistance | 8.0 |
| 52w position | 4.6 |
Risk (lower is worse)
5.0/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.6 |
| days to cover | 9.6 |
| volatility | 3.1 |
| put call | 0.0 |
| implied vol | 3.6 |
| max pain risk | 3.0 |
| beta | 9.7 |
| debt equity | 2.4 |
- ▸Elevated put/call: 3.50
- ▸Above max pain $2
Catalyst
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 3.5 |
| earnings history | 5.6 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| dividend safety | 8.5 |
- ▸Earnings in 6 days
- ▸Dividend aristocrat: 4.0% yield
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- ASYMMETRY:4.7>=1.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:3.5<4.5
- EARNINGS_PROXIMITY:6d<=7d
Warning (0)
none
Reward-to-Risk
4.67
Upside
+35.0%
Downside
7.5%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeInst Constrain — Small cap ($1.5B) below institutional reach
SuitabilityAggressive — MCap $1.5B<$5B
Investment implication
The F-path SELL output reflects an overall score of 2.8 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 9.5) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:3.5<4.5, EARNINGS_PROXIMITY:6d<=7d) reinforce the read. Current asymmetry R:R is 4.67 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 9.5, Growth at 8.1, and Sentiment at 6.9; the weakest are Momentum at 3.5, Insider at 3.9, and Quality at 4.4. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of 4.67 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Earnings Beat Streak
Trip ifEPS surprise stays below 0% in the November 12 report and the following quarter.
- P2Deep Value Analyst Upside
Trip ifPrice rises above $9.43 analyst target or forward P/E exceeds 12x.
- P3High Roe Uneven Cash Flow
Trip ifROE falls below 20% from current 36%.
- P4Weak Momentum Capitulation
Trip ifPrice falls below the $6.51 stop level, more than 3.3% below $6.73.
- P5Leverage And Sector Headwind
Trip ifDebt-to-equity exceeds 3.5 from current 2.6.