Should Value Investors Buy El Pollo Loco (LOCO) Stock?
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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
One company to watch right now is El Pollo Loco (LOCO). LOCO is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 10.83. This compares to its industry's average Forward P/E of 22.28. Over the last 12 months, LOCO's Forward P/E has been as high as 18.18 and as low as 10.83, with a median of 13.25.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. LOCO has a P/S ratio of 0.67. This compares to its industry's average P/S of 0.91.
Finally, investors should note that LOCO has a P/CF ratio of 8.26. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. LOCO's current P/CF looks attractive when compared to its industry's average P/CF of 16.88. LOCO's P/CF has been as high as 13.21 and as low as 7.81, with a median of 9.61, all within the past year.
Carrols Restaurant Group (TAST) may be another strong Retail - Restaurants stock to add to your shortlist. TAST is a # 1 (Strong Buy) stock with a Value grade of A.
Carrols Restaurant Group also has a P/B ratio of 2.02 compared to its industry's price-to-book ratio of -24.27. Over the past year, its P/B ratio has been as high as 2.39, as low as 0.43, with a median of 0.79.
These figures are just a handful of the metrics value investors tend to look at, but they help show that El Pollo Loco and Carrols Restaurant Group are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, LOCO and TAST feels like a great value stock at the moment.
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El Pollo Loco Holdings, Inc. (LOCO) : Free Stock Analysis Report
Carrols Restaurant Group, Inc. (TAST) : Free Stock Analysis Report
