Arcos Dorados (NYSE:ARCO – Get Free Report) and Rocky Mountain Chocolate Factory (NASDAQ:RMCF – Get Free Report) are both small-cap retail/wholesale companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, valuation, institutional ownership, risk, profitability, dividends and analyst recommendations.
Insider & Institutional Ownership
55.9% of Arcos Dorados shares are owned by institutional investors. Comparatively, 50.3% of Rocky Mountain Chocolate Factory shares are owned by institutional investors. 42.2% of Rocky Mountain Chocolate Factory shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.
Profitability
This table compares Arcos Dorados and Rocky Mountain Chocolate Factory’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Arcos Dorados | 2.89% | 24.54% | 4.10% |
| Rocky Mountain Chocolate Factory | -16.21% | -56.22% | -22.79% |
Earnings and Valuation
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Arcos Dorados | $4.50 billion | 0.32 | $148.76 million | $0.63 | 10.83 |
| Rocky Mountain Chocolate Factory | $29.55 million | 0.42 | -$6.12 million | ($0.63) | -2.56 |
Arcos Dorados has higher revenue and earnings than Rocky Mountain Chocolate Factory. Rocky Mountain Chocolate Factory is trading at a lower price-to-earnings ratio than Arcos Dorados, indicating that it is currently the more affordable of the two stocks.
Analyst Ratings
This is a breakdown of current ratings for Arcos Dorados and Rocky Mountain Chocolate Factory, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Arcos Dorados | 1 | 1 | 0 | 0 | 1.50 |
| Rocky Mountain Chocolate Factory | 1 | 0 | 0 | 0 | 1.00 |
Arcos Dorados currently has a consensus price target of $8.80, suggesting a potential upside of 29.03%. Given Arcos Dorados’ stronger consensus rating and higher probable upside, equities analysts clearly believe Arcos Dorados is more favorable than Rocky Mountain Chocolate Factory.
Volatility and Risk
Arcos Dorados has a beta of 0.6, meaning that its stock price is 40% less volatile than the S&P 500. Comparatively, Rocky Mountain Chocolate Factory has a beta of 1.1, meaning that its stock price is 10% more volatile than the S&P 500.
Dividends
Arcos Dorados pays an annual dividend of $0.24 per share and has a dividend yield of 3.5%. Rocky Mountain Chocolate Factory pays an annual dividend of $0.48 per share and has a dividend yield of 29.7%. Arcos Dorados pays out 38.1% of its earnings in the form of a dividend. Rocky Mountain Chocolate Factory pays out -76.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Arcos Dorados has increased its dividend for 1 consecutive years. Rocky Mountain Chocolate Factory is clearly the better dividend stock, given its higher yield and lower payout ratio.
Summary
Arcos Dorados beats Rocky Mountain Chocolate Factory on 11 of the 16 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 Rocky Mountain Chocolate Factory
Rocky Mountain Chocolate Factory, Inc., together with its subsidiaries, operates as a confectionery franchisor, manufacturer, and retail operator. It operates through Franchising, Manufacturing, Retail Stores, and Other segments. The company produces approximately 400 chocolate candies and other confectionery products, including clusters, caramels, creams, toffees, mints, and truffles; and offers 15 varieties of caramel apples and other products that are prepared in individual stores, as well as provides ice cream, coffee, and other sundries. Rocky Mountain Chocolate Factory, Inc. was founded in 1981 and is headquartered in Durango, Colorado.
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