Main Street Capital (NYSE:MAIN) and Arcos Dorados (NYSE:ARCO) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their risk, dividends, institutional ownership, earnings, valuation, profitability and analyst recommendations.
Institutional and Insider Ownership
19.5% of Main Street Capital shares are owned by institutional investors. Comparatively, 38.8% of Arcos Dorados shares are owned by institutional investors. 5.1% of Main Street Capital shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.
Valuation & Earnings
This table compares Main Street Capital and Arcos Dorados' gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Main Street Capital | $243.37 million | 10.00 | $129.57 million | $2.50 | 14.68 |
| Arcos Dorados | $2.96 billion | 0.37 | $79.90 million | $0.38 | 13.87 |
Main Street Capital has higher earnings, but lower revenue than Arcos Dorados. Arcos Dorados is trading at a lower price-to-earnings ratio than Main Street Capital, indicating that it is currently the more affordable of the two stocks.
Analyst Recommendations
This is a summary of recent recommendations and price targets for Main Street Capital and Arcos Dorados, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Main Street Capital | 0 | 3 | 0 | 0 | 2.00 |
| Arcos Dorados | 0 | 1 | 2 | 0 | 2.67 |
Main Street Capital currently has a consensus target price of $28.3333, indicating a potential downside of 22.82%. Arcos Dorados has a consensus target price of $5.8333, indicating a potential upside of 10.69%. Given Arcos Dorados' stronger consensus rating and higher probable upside, analysts clearly believe Arcos Dorados is more favorable than Main Street Capital.
Profitability
This table compares Main Street Capital and Arcos Dorados' net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Main Street Capital | -15.34% | 9.71% | 5.30% |
| Arcos Dorados | -6.50% | -55.12% | -6.11% |
Dividends
Main Street Capital pays an annual dividend of $2.46 per share and has a dividend yield of 6.7%. Arcos Dorados pays an annual dividend of $0.12 per share and has a dividend yield of 2.3%. Main Street Capital pays out 98.4% 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 31.6% of its earnings in the form of a dividend. Main Street Capital has raised its dividend for 1 consecutive years. Main Street Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Volatility and Risk
Main Street Capital has a beta of 1.42, indicating that its share price is 42% more volatile than the S&P 500. Comparatively, Arcos Dorados has a beta of 1.58, indicating that its share price is 58% more volatile than the S&P 500.
Summary
Arcos Dorados beats Main Street Capital on 9 of the 17 factors compared between the two stocks.
