Arcos Dorados Holdings (ARCO) is back in focus after reporting first quarter 2026 results that featured 13% revenue growth, 16% system-wide comparable sales growth, and record adjusted EBITDA, with Brazil margins a clear highlight for investors.

The recent first quarter earnings news follows a strong run in the stock, with an 8.61% 1 month share price return, 13.35% 3 month share price return and 21.12% year to date share price return. The 1 year total shareholder return stands at 20.80% and the 5 year total shareholder return is 59.53%, indicating that recent momentum aligns with a longer track record of value creation.

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With ARCO trading at $8.83 and sitting about 21% below an indicated intrinsic value estimate and roughly 25% below an analyst price target, the key question is whether there is still upside potential or if the market is already pricing in future growth.

Most Popular Narrative: 10.9% Undervalued

With Arcos Dorados trading at $8.83 versus a narrative fair value of $9.91, the most followed view suggests the stock trades at a discount, anchored by execution on growth and margin plans.

Ongoing expansion and modernization of Experience of the Future (EOTF) restaurants, combined with investments in operational efficiency and cost control measures, are expected to drive higher average ticket size, increased throughput, and EBITDA margin expansion over time.

Curious what kind of revenue path and margin reset sit behind that fair value gap? The narrative leans on measured top line growth, softer earnings, and a richer future earnings multiple. The exact mix of growth, profitability, and discount rate assumptions might surprise you.

Result: Fair Value of $9.91 (UNDERVALUED)

However, this story can change quickly if weaker consumer demand in key markets and higher input costs continue to pressure margins and undercut the current fair value narrative.

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Next Steps

With sentiment clearly split between risks and rewards, this is a good time to move quickly, review the data yourself, and weigh both sides with 4 key rewards and 3 important warning signs

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.