TACO or LOCO: Which Is the Better Value Stock Right Now?
Investors with an interest in Retail - Restaurants stocks have likely encountered both Del Taco Restaurants (TACO) and El Pollo Loco Holdings (LOCO). 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Del Taco Restaurants and El Pollo Loco Holdings are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that TACO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
TACO currently has a forward P/E ratio of 18.25, while LOCO has a forward P/E of 21.28. We also note that TACO has a PEG ratio of 1.15. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. LOCO currently has a PEG ratio of 1.42.
Another notable valuation metric for TACO is its P/B ratio of 0.94. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, LOCO has a P/B of 2.24.
These metrics, and several others, help TACO earn a Value grade of A, while LOCO has been given a Value grade of C.
TACO is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that TACO is likely the superior value option right now.
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Del Taco Restaurants, Inc. (TACO) : Free Stock Analysis Report
El Pollo Loco Holdings, Inc. (LOCO) : Free Stock Analysis Report
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