Arcos Dorados (NYSE:ARCO) and Intergroup (NASDAQ:INTG) Critical Analysis

Intergroup (NASDAQ:INTG) and Arcos Dorados (NYSE:ARCO) are both small-cap consumer discretionary companies, but which is the superior stock? We will contrast the two businesses based on the strength of their dividends, valuation, risk, profitability, analyst recommendations, earnings and institutional ownership.

Analyst Recommendations

This is a summary of recent recommendations for Intergroup and Arcos Dorados, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Intergroup	0	1	0	0	2.00
Arcos Dorados	0	2	3	0	2.60

Arcos Dorados has a consensus price target of $10.50, suggesting a potential upside of 29.25%. Given Arcos Dorados’ stronger consensus rating and higher probable upside, analysts plainly believe Arcos Dorados is more favorable than Intergroup.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Intergroup	2.22%	-1.43%	1.60%
Arcos Dorados	5.15%	12.50%	2.58%

Institutional & Insider Ownership

3.4% of Intergroup shares are held by institutional investors. Comparatively, 55.9% of Arcos Dorados shares are held by institutional investors. 73.8% of Intergroup shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Earnings and Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Intergroup	$73.95 million	0.94	$1.64 million	$0.71	45.37
Arcos Dorados	$4.68 billion	0.37	$212.12 million	$1.22	6.66

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

Volatility & Risk

Intergroup has a beta of 0.06, suggesting that its stock price is 94% less volatile than the S&P 500. Comparatively, Arcos Dorados has a beta of 0.48, suggesting that its stock price is 52% less volatile than the S&P 500.

Summary

Arcos Dorados beats Intergroup on 11 of the 14 factors compared between the two stocks.

About Intergroup

The InterGroup Corporation, through its subsidiaries, operates a hotel under the Hilton San Francisco Financial District name located in San Francisco, California. The company operates through three segments: Hotel Operations, Real Estate Operations, and Investment Transactions. Its hotel consists of guest rooms and luxury suites, a restaurant, a lounge, a private dining room, meeting room space, a gym, a grand ballroom, 5-level underground parking garage, a pedestrian bridge, and a Chinese culture center. The company also invests in income-producing instruments, corporate debt and equity securities, publicly traded investment funds, mortgage-backed securities, securities issued by REITs, and other companies that invest primarily in real estate. In addition, it owns, manages, and invests in apartment complexes, single-family houses as strategic investments, and commercial real estate property located in the United States, as well as owns unimproved land in Maui, Hawaii. The InterGroup Corporation was founded in 1965 and is based in Los Angeles, California.

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.