Reviewing Arcos Dorados (NYSE:ARCO) & Rave Restaurant Group (NASDAQ:RAVE)

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

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Arcos Dorados and Rave Restaurant Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Arcos Dorados	0	3	2	0	2.40
Rave Restaurant Group	0	1	0	0	2.00

Arcos Dorados presently has a consensus price target of $8.70, indicating a potential upside of 4.38%. Given Arcos Dorados’ stronger consensus rating and higher probable upside, equities analysts clearly believe Arcos Dorados is more favorable than Rave Restaurant Group.

Risk & Volatility

Arcos Dorados has a beta of 0.46, suggesting that its stock price is 54% less volatile than the S&P 500. Comparatively, Rave Restaurant Group has a beta of 0.41, suggesting that its stock price is 59% less volatile than the S&P 500.

Valuation & Earnings

This table compares Arcos Dorados and Rave Restaurant Group”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Arcos Dorados	$4.68 billion	0.38	$212.12 million	$1.11	7.51
Rave Restaurant Group	$12.04 million	3.32	$2.70 million	$0.21	13.38

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Arcos Dorados	4.86%	10.47%	2.06%
Rave Restaurant Group	23.19%	19.22%	16.81%

Insider & Institutional Ownership

55.9% of Arcos Dorados shares are held by institutional investors. Comparatively, 15.1% of Rave Restaurant Group shares are held by institutional investors. 28.0% of Rave Restaurant Group 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.

Summary

Arcos Dorados beats Rave Restaurant Group on 8 of the 14 factors compared between the two stocks.

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.

About Rave Restaurant Group

Rave Restaurant Group, Inc., together with its subsidiaries, engages in the operation and franchising of pizza buffet, delivery/carry-out (delco), and express restaurants under the Pizza Inn and Pie Five trademarks in the United States and internationally. The company operates through three segments: Pizza Inn Franchising, Pie Five Franchising, and Company-Owned Restaurants. Its buffet restaurants are located in free standing buildings or strip centers in retail developments that offer dine-in, carryout, and catering services, as well as delivery services. The company’s delco restaurants provide delivery and carryout services and are located in shopping centers or other in-line retail developments. Its Express restaurants serve customers through various non-traditional points of sale and are located in convenience stores, food courts, college campuses, airport terminals, travel plazas, athletic facilities, or other commercial facilities. The company’s Pizza Inn Express restaurants serve customers through a non-traditional, licensed, pizza-only model called Pizza Inn Express, located at production-oriented facilities. In addition, it operates and franchises fast casual restaurants under the Pie Five Pizza Company or Pie Five trademarks. The company was formerly known as Pizza Inn Holdings, Inc. and changed its name to Rave Restaurant Group, Inc. in January 2015. Rave Restaurant Group, Inc. was founded in 1958 and is based in The Colony, Texas.