Back to top

Image: Bigstock

Should Value Investors Buy El Pollo Loco (LOCO) Stock?

Read MoreHide Full Article

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 use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 stock to keep an eye on is El Pollo Loco (LOCO - Free Report) . LOCO is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 13.18. This compares to its industry's average Forward P/E of 26.91. LOCO's Forward P/E has been as high as 16.11 and as low as 11.53, with a median of 13.99, all within the past year.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. 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 0.76. This compares to its industry's average P/S of 0.95.

Finally, our model also underscores that LOCO has a P/CF ratio of 8.98. 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. This company's current P/CF looks solid when compared to its industry's average P/CF of 23.41. LOCO's P/CF has been as high as 10.11 and as low as 6.06, with a median of 7.75, all within the past year.

These are just a handful of the figures considered in El Pollo Loco's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that LOCO is an impressive value stock right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


El Pollo Loco Holdings, Inc. (LOCO) - free report >>

Published in