Portillo’s (NASDAQ:PTLO) vs. Arcos Dorados (NYSE:ARCO) Critical Review

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Portillo’s	3.65%	5.62%	1.82%
Arcos Dorados	3.25%	29.74%	4.99%

Institutional and Insider Ownership

98.3% of Portillo’s shares are held by institutional investors. Comparatively, 55.9% of Arcos Dorados shares are held by institutional investors. 6.6% of Portillo’s shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Portillo’s and Arcos Dorados, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Portillo’s	0	4	3	0	2.43
Arcos Dorados	0	0	1	0	3.00

Portillo’s presently has a consensus target price of $13.57, suggesting a potential upside of 40.06%. Arcos Dorados has a consensus target price of $12.00, suggesting a potential upside of 59.36%. Given Arcos Dorados’ stronger consensus rating and higher possible upside, analysts plainly believe Arcos Dorados is more favorable than Portillo’s.

Valuation & Earnings

This table compares Portillo’s and Arcos Dorados”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Portillo’s	$713.80 million	1.01	$18.42 million	$0.42	23.07
Arcos Dorados	$4.50 billion	0.35	$181.27 million	$0.70	10.76

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

Volatility and Risk

Portillo’s has a beta of 1.72, suggesting that its share price is 72% more volatile than the S&P 500. Comparatively, Arcos Dorados has a beta of 1.13, suggesting that its share price is 13% more volatile than the S&P 500.

About Portillo’s

Portillo’s Inc. owns and operates fast casual restaurants in the United States. The company offers Chicago-style hot dogs and sausages, Italian beef sandwiches, char-grilled burgers, chopped salads, crinkle-cut French fries, homemade chocolate cakes, and chocolate cake shake. It offers its products through its website, application, and certain third-party platforms. Portillo’s Inc. was founded in 1963 and is based in Oak Brook, Illinois.

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, Curacao, Ecuador, French Guiana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto Rico, Trinidad and Tobago, Uruguay, the U.S. Virgin Islands of St. Croix and St. Thomas, and Venezuela. The company was founded in 2007 and is based in Montevideo, Uruguay.