Starbucks (NASDAQ:SBUX) & Arcos Dorados (NYSE:ARCO) Head-To-Head Survey

Starbucks (NASDAQ:SBUX) and Arcos Dorados (NYSE:ARCO) are both retail/wholesale companies, but which is the superior investment? We will compare the two businesses based on the strength of their analyst recommendations, risk, institutional ownership, profitability, earnings, dividends and valuation.

Earnings and Valuation

This table compares Starbucks and Arcos Dorados”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Starbucks	$37.70 billion	2.77	$1.86 billion	$1.21	75.99
Arcos Dorados	$4.47 billion	N/A	$148.76 million	$1.17	7.00

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.

Dividends

Starbucks pays an annual dividend of $2.48 per share and has a dividend yield of 2.7%. Arcos Dorados pays an annual dividend of $0.24 per share and has a dividend yield of 2.9%. Starbucks pays out 205.0% 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 increased its dividend for 15 consecutive years and Arcos Dorados has increased its dividend for 1 consecutive years. Arcos Dorados is clearly the better dividend stock, given its higher yield and lower payout ratio.

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	3.63%	-28.66%	7.03%
Arcos Dorados	5.39%	20.42%	3.61%

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 company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

Starbucks has a beta of 0.97, suggesting that its stock price is 3% less volatile than the S&P 500. Comparatively, Arcos Dorados has a beta of 0.46, suggesting that its stock price is 54% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations for Starbucks and Arcos Dorados, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Starbucks	2	7	19	0	2.61
Arcos Dorados	0	3	0	0	2.00

Starbucks presently has a consensus target price of $104.74, suggesting a potential upside of 13.91%. Arcos Dorados has a consensus target price of $8.70, suggesting a potential upside of 6.23%. Given Starbucks’ stronger consensus rating and higher probable upside, equities research analysts plainly believe Starbucks is more favorable than Arcos Dorados.

Summary

Starbucks beats Arcos Dorados on 12 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.