Critical Comparison: El Pollo LoCo (NASDAQ:LOCO) & Del Taco Restaurants (NASDAQ:TACO)

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El Pollo LoCo (NASDAQ:LOCO) and Del Taco Restaurants (NASDAQ:TACO) are both small-cap retail/wholesale companies, but which is the better business? We will contrast the two businesses based on the strength of their profitability, risk, dividends, earnings, institutional ownership, analyst recommendations and valuation.

Insider & Institutional Ownership

96.8% of El Pollo LoCo shares are held by institutional investors. Comparatively, 80.8% of Del Taco Restaurants shares are held by institutional investors. 44.2% of El Pollo LoCo shares are held by insiders. Comparatively, 16.4% of Del Taco Restaurants shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current recommendations and price targets for El Pollo LoCo and Del Taco Restaurants, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
El Pollo LoCo 0 1 1 0 2.50
Del Taco Restaurants 0 1 4 0 2.80

El Pollo LoCo currently has a consensus target price of $15.50, suggesting a potential upside of 55.31%. Del Taco Restaurants has a consensus target price of $14.60, suggesting a potential upside of 33.09%. Given El Pollo LoCo’s higher possible upside, research analysts plainly believe El Pollo LoCo is more favorable than Del Taco Restaurants.

Earnings & Valuation

This table compares El Pollo LoCo and Del Taco Restaurants’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
El Pollo LoCo $435.83 million 0.84 -$8.99 million $0.74 13.49
Del Taco Restaurants $505.49 million 0.80 $18.96 million $0.56 19.59

Del Taco Restaurants has higher revenue and earnings than El Pollo LoCo. El Pollo LoCo is trading at a lower price-to-earnings ratio than Del Taco Restaurants, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares El Pollo LoCo and Del Taco Restaurants’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
El Pollo LoCo -0.36% 10.49% 5.20%
Del Taco Restaurants 2.94% 4.62% 2.28%

Volatility & Risk

El Pollo LoCo has a beta of 0.46, indicating that its stock price is 54% less volatile than the S&P 500. Comparatively, Del Taco Restaurants has a beta of 0.24, indicating that its stock price is 76% less volatile than the S&P 500.

Summary

El Pollo LoCo beats Del Taco Restaurants on 8 of the 14 factors compared between the two stocks.

About El Pollo LoCo

El Pollo Loco Holdings, Inc., through its subsidiary El Pollo Loco, Inc., develops, franchises, licenses, and operates quick-service restaurants under the El Pollo Loco name. The company offers citrus-marinated, flame-grilled chicken, and handcrafted entrée products, including specialty chicken burritos, chicken quesadillas, and chicken tortilla soup, as well as under 500 calorie entrees, and Pollo Bowl and Pollo salad products. As of May 2, 2019, it had approximately 480 company-owned and franchised restaurants in Arizona, California, Nevada, Texas, Utah, and Louisiana. The company was formerly known as Chicken Acquisition Corp. and changed its name to El Pollo Loco Holdings, Inc. in April 2014. El Pollo Loco Holdings, Inc. was founded in 1980 and is headquartered in Costa Mesa, California.

About Del Taco Restaurants

Del Taco Restaurants, Inc. develops, franchises, owns, and operates Del Taco quick-service Mexican-American restaurants in the United States. The company's restaurants offer Mexican inspired and American classic dishes. As of December 10, 2018, it operated approximately 560 restaurants across 14 states. The company was founded in 1964 and is headquartered in Lake Forest, California.

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