Papa Murphy's (FRSH) versus Arcos Dorados (ARCO) Critical Comparison

Papa Murphy's (NASDAQ: FRSH) and Arcos Dorados (NYSE:ARCO) are both retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, dividends, profitability, institutional ownership, risk, analyst recommendations and valuation.

Profitability

This table compares Papa Murphy's and Arcos Dorados’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Papa Murphy's -9.72% 5.05% 1.83%
Arcos Dorados 2.51% 20.04% 5.19%

Institutional & Insider Ownership

32.3% of Papa Murphy's shares are held by institutional investors. Comparatively, 36.6% of Arcos Dorados shares are held by institutional investors. 3.1% of Papa Murphy's shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Papa Murphy's and Arcos Dorados’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Papa Murphy's $126.88 million 0.74 $2.64 million ($0.71) -7.79
Arcos Dorados $2.93 billion 0.70 $78.81 million $0.38 25.40

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

Volatility & Risk

Papa Murphy's has a beta of 0.14, meaning that its share price is 86% less volatile than the S&P 500. Comparatively, Arcos Dorados has a beta of 2.04, meaning that its share price is 104% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and target prices for Papa Murphy's and Arcos Dorados, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Papa Murphy's 0 2 0 0 2.00
Arcos Dorados 0 0 3 0 3.00

Papa Murphy's presently has a consensus target price of $4.75, suggesting a potential downside of 14.10%. Arcos Dorados has a consensus target price of $10.87, suggesting a potential upside of 12.61%. Given Arcos Dorados’ stronger consensus rating and higher probable upside, analysts plainly believe Arcos Dorados is more favorable than Papa Murphy's.

Summary

Arcos Dorados beats Papa Murphy's on 12 of the 14 factors compared between the two stocks.

About Papa Murphy's

Papa Murphy’s Holdings, Inc. is a holding company. The Company, together with its subsidiaries, is a franchisor and operator of the Take ‘N’ Bake pizza chain in the United States. The Company franchises the right to operate Take ‘N’ Bake pizza franchises and operates Take ‘N’ Bake pizza stores owned by the Company. The Company operates through three segments: Domestic Company Stores, Domestic Franchise and International. Its Domestic Franchise segment consists of its domestic franchised stores, which represent its system-wide stores and derives its revenues from franchise and development fees and the collection of franchise royalties. The Domestic Company Stores segment consists of its Company-owned stores in the United States and derives its revenues from retail sales of pizza and side items to the general public. Its International segment consists of its stores outside of the United States, all of which are franchised and derives its revenues from franchise and development fees.

About Arcos Dorados

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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