McDonald’s Corporation (NYSE: MCD) and Arcos Dorados Holdings (NYSE:ARCO) are both retail/wholesale companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, risk, valuation, profitability and dividends.

Valuation and Earnings

This table compares McDonald’s Corporation and Arcos Dorados Holdings’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
McDonald’s Corporation $24.18 billion 5.35 $9.60 billion $6.11 26.16
Arcos Dorados Holdings $3.16 billion 0.59 $249.87 million $0.26 34.23

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

Analyst Ratings

This is a summary of recent recommendations and price targets for McDonald’s Corporation and Arcos Dorados Holdings, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
McDonald’s Corporation 0 9 22 0 2.71
Arcos Dorados Holdings 0 0 3 0 3.00

McDonald’s Corporation presently has a consensus target price of $162.05, indicating a potential upside of 1.40%. Arcos Dorados Holdings has a consensus target price of $9.53, indicating a potential upside of 7.12%. Given Arcos Dorados Holdings’ stronger consensus rating and higher possible upside, analysts clearly believe Arcos Dorados Holdings is more favorable than McDonald’s Corporation.

Risk and Volatility

McDonald’s Corporation has a beta of 0.7, suggesting that its stock price is 30% less volatile than the S&P 500. Comparatively, Arcos Dorados Holdings has a beta of 2.16, suggesting that its stock price is 116% more volatile than the S&P 500.

Insider & Institutional Ownership

67.9% of McDonald’s Corporation shares are owned by institutional investors. Comparatively, 36.7% of Arcos Dorados Holdings shares are owned by institutional investors. 0.2% of McDonald’s Corporation shares are owned by 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.

Profitability

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

Net Margins Return on Equity Return on Assets
McDonald’s Corporation 21.00% -264.89% 16.21%
Arcos Dorados Holdings 1.76% 14.68% 3.69%

Dividends

McDonald’s Corporation pays an annual dividend of $3.76 per share and has a dividend yield of 2.4%. Arcos Dorados Holdings does not pay a dividend. McDonald’s Corporation pays out 61.5% of its earnings in the form of a dividend. McDonald’s Corporation has raised its dividend for 40 consecutive years and Arcos Dorados Holdings has raised its dividend for 3 consecutive years.

Summary

McDonald’s Corporation beats Arcos Dorados Holdings on 11 of the 17 factors compared between the two stocks.

McDonald’s Corporation Company Profile

McDonald’s Corporation (McDonald’s) operates and franchises McDonald’s restaurants. The Company’s restaurants serve a locally relevant menu of food and drinks sold at various price points in over 100 countries. The Company’s segments include U.S., International Lead Markets, High Growth Markets, and Foundational Markets and Corporate. The U.S. segment focuses on offering a platform for authentic ingredients that allows customers to customize their sandwiches. Its High Growth Markets segment includes its operations in markets, such as China, Italy, Korea, Poland, Russia, Spain, Switzerland, the Netherlands and related markets. The International Lead markets segment includes the Company’s operations in various markets, such as Australia, Canada, France, Germany, the United Kingdom and related markets. The Foundational markets and Corporate segment is engaged in operating restaurants and increasing convenience to customers, including through drive-thru and delivery.

Arcos Dorados Holdings Company Profile

Arcos Dorados Holdings Inc. is a McDonald’s franchisee. The Company operates or franchises over 2,140 McDonald’s-branded restaurants. It divides its operations into four geographical divisions: Brazil; the Caribbean division, consisting of Aruba, Colombia, Curacao, French Guiana, Guadeloupe, Martinique, Puerto Rico, Trinidad and Tobago, the United States Virgin Islands of Saint Croix and Saint Thomas, and Venezuela; the North Latin America division (NOLAD), consisting of Costa Rica, Mexico and Panama, and the South Latin America division (SLAD), consisting of Argentina, Chile, Ecuador, Peru and Uruguay. Its menus feature over three tiers of products: entry-level options, such as its Big Pleasures, Small Prices offerings and Almuerzos Colombianos (Colombian Lunches) in Colombia; core menu options, such as the Big Mac, Happy Meal and Quarter Pounder, and premium options, such as Big Tasty or Angus premium hamburgers and chicken sandwiches and low-calorie or low-sodium products.

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