Is El Pollo Loco (LOCO) Stock Undervalued Right Now?
The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One stock to keep an eye on is El Pollo Loco (LOCO). LOCO is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 9.88, while its industry has an average P/E of 21.52. Over the past year, LOCO's Forward P/E has been as high as 18.18 and as low as 9.88, with a median of 13.12.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. LOCO has a P/S ratio of 0.62. This compares to its industry's average P/S of 0.83.
Finally, investors should note that LOCO has a P/CF ratio of 7.64. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. LOCO's P/CF compares to its industry's average P/CF of 16.36. LOCO's P/CF has been as high as 13.21 and as low as 7.60, with a median of 9.46, all within the past year.
If you're looking for another solid Retail - Restaurants value stock, take a look at Potbelly (PBPB). PBPB is a # 2 (Buy) stock with a Value score of A.
Potbelly also has a P/B ratio of 34.36 compared to its industry's price-to-book ratio of -23.62. Over the past year, its P/B ratio has been as high as 184.47, as low as 29.92, with a median of 52.39.
Value investors will likely look at more than just these metrics, but the above data helps show that El Pollo Loco and Potbelly are likely undervalued currently. And when considering the strength of its earnings outlook, LOCO and PBPB sticks out as one of the market's strongest value stocks.
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El Pollo Loco Holdings, Inc. (LOCO) : Free Stock Analysis Report
Potbelly Corporation (PBPB) : Free Stock Analysis Report
