Starbucks (NASDAQ:SBUX – Get Free Report) and Arcos Dorados (NYSE:ARCO – Get Free Report) are both retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, profitability, institutional ownership, earnings, valuation, dividends and analyst recommendations.
Analyst Recommendations
This is a summary of recent ratings and price targets for Starbucks and Arcos Dorados, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Starbucks | 3 | 8 | 17 | 0 | 2.50 |
| Arcos Dorados | 0 | 3 | 0 | 0 | 2.00 |
Starbucks currently has a consensus price target of $103.15, suggesting a potential upside of 5.67%. Arcos Dorados has a consensus price target of $8.70, suggesting a potential upside of 11.75%. Given Arcos Dorados’ higher probable upside, analysts clearly believe Arcos Dorados is more favorable than Starbucks.
Risk & Volatility
Dividends
Starbucks pays an annual dividend of $2.48 per share and has a dividend yield of 2.5%. Arcos Dorados pays an annual dividend of $0.24 per share and has a dividend yield of 3.1%. Starbucks pays out 151.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Arcos Dorados pays out 20.5% of its earnings in the form of a dividend. Starbucks has raised its dividend for 15 consecutive years and Arcos Dorados has raised its dividend for 1 consecutive years. Arcos Dorados is clearly the better dividend stock, given its higher yield and lower payout ratio.
Institutional & Insider Ownership
72.3% of Starbucks shares are held by institutional investors. Comparatively, 55.9% of Arcos Dorados shares are held by institutional investors. 0.1% of Starbucks shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.
Profitability
This table compares Starbucks and Arcos Dorados’ net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Starbucks | 4.99% | -31.32% | 7.48% |
| Arcos Dorados | 5.39% | 20.42% | 3.61% |
Earnings and Valuation
This table compares Starbucks and Arcos Dorados”s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Starbucks | $37.18 billion | 2.99 | $1.86 billion | $1.64 | 59.52 |
| Arcos Dorados | $4.47 billion | N/A | $148.76 million | $1.17 | 6.65 |
Starbucks has higher revenue and earnings than Arcos Dorados. Arcos Dorados is trading at a lower price-to-earnings ratio than Starbucks, indicating that it is currently the more affordable of the two stocks.
Summary
Starbucks beats Arcos Dorados on 11 of the 16 factors compared between the two stocks.
About Starbucks
Starbucks Corporation, together with its subsidiaries, operates as a roaster, marketer, and retailer of coffee worldwide. The company operates through three segments: North America, International, and Channel Development. Its stores offer coffee and tea beverages, roasted whole beans and ground coffees, single serve products, and ready-to-drink beverages; and various food products, such as pastries, breakfast sandwiches, and lunch items. The company also licenses its trademarks through licensed stores, and grocery and foodservice accounts. The company offers its products under the Starbucks Coffee, Teavana, Seattle’s Best Coffee, Ethos, Starbucks Reserve, and Princi brands. Starbucks Corporation was founded in 1971 and is based in Seattle, Washington.
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.
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