Arcos Dorados (NYSE:ARCO) & BAB (OTCMKTS:BABB) Head to Head Survey

BAB (OTCMKTS:BABB) and Arcos Dorados (NYSE:ARCO) are both small-cap consumer staples companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, institutional ownership, profitability, analyst recommendations, risk, dividends and valuation.

Insider and Institutional Ownership

55.9% of Arcos Dorados shares are owned by institutional investors. 33.7% of BAB shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings for BAB and Arcos Dorados, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
BAB	0	0	0	0	0.00
Arcos Dorados	0	0	1	0	3.00

Arcos Dorados has a consensus target price of $12.00, suggesting a potential upside of 57.79%. Given Arcos Dorados’ stronger consensus rating and higher probable upside, analysts plainly believe Arcos Dorados is more favorable than BAB.

Profitability

This table compares BAB and Arcos Dorados’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
BAB	15.28%	16.96%	11.71%
Arcos Dorados	3.25%	29.74%	4.99%

Valuation & Earnings

This table compares BAB and Arcos Dorados”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
BAB	$3.51 million	1.86	$470,000.00	$0.07	12.82
Arcos Dorados	$4.33 billion	0.37	$181.27 million	$0.70	10.86

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

Risk and Volatility

BAB has a beta of 0.02, meaning that its share price is 98% less volatile than the S&P 500. Comparatively, Arcos Dorados has a beta of 1.13, meaning that its share price is 13% more volatile than the S&P 500.

Dividends

BAB pays an annual dividend of $0.04 per share and has a dividend yield of 4.5%. Arcos Dorados pays an annual dividend of $0.24 per share and has a dividend yield of 3.2%. BAB pays out 57.1% of its earnings in the form of a dividend. Arcos Dorados pays out 34.3% 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.

Summary

Arcos Dorados beats BAB on 10 of the 16 factors compared between the two stocks.

About BAB

BAB, Inc. franchises and licenses bagel and muffin retail units under the Big Apple Bagels (BAB), My Favorite Muffin (MFM), and SweetDuet (SD) trade names in the United States. It's BAB franchised brand includes daily baked bagels, flavored cream cheeses, premium coffees, gourmet bagel sandwiches, and other related products; and MFM brand comprises various freshly baked muffins and coffees, as well as units operating as My Favorite Muffin Your All Day Bakery Café features specialty bagel sandwiches and related products. The company's SD brand includes frozen yogurt products. BAB, Inc. was founded in 1993 and is based in Deerfield, Illinois.

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.