Stephen Simpson, CFA
Long only, growth at reasonable price, value, research analyst

Arcos Dorados Somewhere Between Gold And Scrap Iron

For the most part, investors can't seem to get enough of Brazilian consumer stocks, bidding many of them up to exceptionally demanding valuations. And to be fair, many of these companies are producing pretty solid growth numbers. In the case of Arcos Dorados (NYSE:ARCO), though, a combination of sluggish comp-store growth, rampant cost inflation, and fears of competition seem to be combining to create a stock that many investors are pretty ambivalent about today. While it is important that investors not understate the risks to the Arcos business model, I think these shares could be an interesting speculative play at these levels.

Recent Results Highlight Ample Challenges

The going definitely got rougher for Arcos Dorados in 2012, as...

Join Seeking Alpha PRO to read this archived article and 11,574 other archived articles
FREESA PRO MEMBERS
IDEA GENERATORXExclusive access to 10 PRO ideas every day
INVESTING IDEAS LIBRARYXExclusive access to PRO library of more than 15,000 ideas
SECTOR EXPERT NETWORKXExclusive access to all sector experts for direct consultation
PERFORMANCE TRACKINGXTrack performance of all PRO stock ideas
PROFESSIONAL TOOLSXProfessional Idea Filters to zero-in based on industry, market cap and more
"In just the first month of using PRO, I used it to generate two ideas which were actionable for me. As a result of these two positions, I have earned more than 20 times the annual subscription costs for PRO."Michael Yagemann, Greenbridge Capital
"I am pleasantly surprised with the scope of small and mid-cap coverage PRO offers. You can't find that any where else."Patrick Rice, Mainstay Capital Management
You may cancel at any time for any reason, and receive a prompt refund for membership on months paid and not used (max. 6 months). Details