LOCO or DRI: Which Is the Better Value Stock Right Now?
Investors looking for stocks in the Retail - Restaurants sector might want to consider either El Pollo Loco Holdings (LOCO) or Darden Restaurants (DRI). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both El Pollo Loco Holdings and Darden Restaurants have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
LOCO currently has a forward P/E ratio of 16.43, while DRI has a forward P/E of 20.27. We also note that LOCO has a PEG ratio of 1.10. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. DRI currently has a PEG ratio of 2.17.
Another notable valuation metric for LOCO is its P/B ratio of 1.62. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, DRI has a P/B of 6.21.
Based on these metrics and many more, LOCO holds a Value grade of A, while DRI has a Value grade of C.
Both LOCO and DRI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LOCO is the superior value option right now.
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El Pollo Loco Holdings, Inc. (LOCO) : Free Stock Analysis Report
Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report
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