Arcos Dorados pairs a 20-year McDonald’s moat, improving cash flow, and 7.36x P/E with a probability-weighted five-year value of $22.26.
Overview
Arcos Dorados Holdings Inc. is the largest quick-service restaurant operator in Latin America and the Caribbean and McDonald’s largest independent franchisee, with exclusive rights across 20 countries and territories and more than 4.3 million daily customers. Approximately 95% of revenue comes from company-operated restaurants, while royalties and rental income comprise the balance. **The business combines a durable McDonald’s franchise moat with substantial regional underpenetration and digital penetration.** Its 34.3 million-member loyalty ecosystem and digital channels account for 66% of systemwide sales. Q2 2026 revenue reached a record $1,305.6 million, up 14.3% in U.S. dollars and 18.5% in constant currency, while comparable sales rose 15.3%. Adjusted EBITDA increased 15.2% to $126.8 million, and EPS doubled to $0.22. Net leverage was only 1.1x after debt management actions. Despite currency, tax, and emerging-market risks, the stock traded near $8.20 at approximately 7.36x trailing P/E. **The report identifies substantial upside from cash-flow improvement, tax-credit monetization, and multiple normalization**, with a probability-weighted five-year target of $22.26 and near-term support from the October 1, 2026 investor day.