FAT Brands (NASDAQ:FAT) and Arcos Dorados (NYSE:ARCO) are both small-cap retail/wholesale companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, analyst recommendations, valuation, profitability, dividends, earnings and risk.

Volatility & Risk

FAT Brands has a beta of 1.61, suggesting that its share price is 61% more volatile than the S&P 500. Comparatively, Arcos Dorados has a beta of 1.02, suggesting that its share price is 2% more volatile than the S&P 500.

Insider and Institutional Ownership

1.5% of FAT Brands shares are held by institutional investors. Comparatively, 39.2% of Arcos Dorados shares are held by institutional investors. 1.3% of FAT Brands shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares FAT Brands and Arcos Dorados’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
FAT Brands $18.37 million 3.27 -$1.80 million N/A N/A
Arcos Dorados $3.08 billion 0.48 $36.85 million $0.18 38.56

Arcos Dorados has higher revenue and earnings than FAT Brands.

Analyst Ratings

This is a summary of recent recommendations and price targets for FAT Brands and Arcos Dorados, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
FAT Brands 0 0 1 0 3.00
Arcos Dorados 1 0 0 0 1.00

FAT Brands currently has a consensus target price of $12.00, suggesting a potential upside of 135.76%. Given FAT Brands’ stronger consensus rating and higher probable upside, equities research analysts clearly believe FAT Brands is more favorable than Arcos Dorados.

Profitability

This table compares FAT Brands and Arcos Dorados’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
FAT Brands -9.79% -36.75% -4.14%
Arcos Dorados 1.20% 8.87% 2.34%

Dividends

FAT Brands pays an annual dividend of $0.48 per share and has a dividend yield of 9.4%. Arcos Dorados pays an annual dividend of $0.20 per share and has a dividend yield of 2.9%. Arcos Dorados pays out 111.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

FAT Brands beats Arcos Dorados on 8 of the 14 factors compared between the two stocks.

FAT Brands Company Profile

FAT Brands Inc., a multi-brand franchising company, acquires, markets, and develops fast casual and casual dining restaurant concepts. As of January 23, 2019, it owned 7 restaurant brands, including Fatburger, Buffalo's Cafe, Buffalo's Express, Hurricane Grill & Wings, Yalla Mediterranean, Ponderosa Steakhouse, and Bonanza Steakhouse with approximately 300 locations open and 300 under development in 32 countries. The company was founded in 2017 and is headquartered in Beverly Hills, California. FAT Brands Inc. is a subsidiary of Fog Cutter Capital Group Inc.

Arcos Dorados Company Profile

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, CuraƧao, 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 March 27, 2019, the company operated or franchised approximately 2,200 McDonald's-branded restaurants in Latin America. Arcos Dorados Holdings Inc. was founded in 2007 and is based in Montevideo, Uruguay.

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