This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Is El Pollo Loco Overrated or Should Chipotle Watch Its Mirrors?

NEW YORK (TheStreet) -- Since El Pollo Loco's (LOCO)initial public offering from last Friday, the company's stock added over $15 to its value and shares are currently at $35.65 in midday trading. The company's staggering rise resulted in many analysts comparing this quick-service restaurants chain to Chipotle Mexican Grill (CMG), which has also performed well in the stock market and has increased by 14.5% in the past month to $678.02 per share. But is El Pollo Loco anything like Chipotle? Let's take a closer at these two companies and compare several key factors:

Growth in Sales

El Pollo Loco's revenue reached $81.4 million in the first quarter of 2014. This represents a 5.7% gain compared to the same quarter last year. In comparison, during the second quarter, Chipotle's revenue grew by 28%, year over year.

Profit Margins

During the first quarter, El Pollo Loco's net income was $5.47 million, which represents a 6.7% profitability.

In comparison, Chipotle's net profitability was 10.5% in the past quarter. So Chipotle is outperforming El Pollo LoCo in terms of growth in sales and profit margins.

Debt

The debt burden El Pollo Loco has is very high as its debt-to-equity ratio is 5.3. Chipotle has no debt on its balance sheet. This means, El Pollo Loco's financial risk is much greater and the company allocates a chunk of its profits towards paying its interest payments.

Valuation

Due to Chipotle's higher growth in sales, no debt and sizable profit margins, the company's valuation is higher than El Pollo Loco.

Currently, Chipotle's enterprise value to EBITDA ratio is 29.10 and its enterprise value to revenue is 5.55.

El Pollo LoCo's EV/EBITDA is 20.62 and its EV/revenue is only 3.53.

So for now Chipotle's current stock price is still higher than El Pollo Loco's. But if El Pollo Loco's stock continues to rise at this pace, the gap between the two will shrink. Considering Chipotle's strong performance and low financial risk, the company should remain at a much higher value than El Pollo Loco. 

Therefore, El Pollo Loco's staggering rise in the stock market might not last long considering the company's performance compared to its peer.

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
LOCO $18.84 3.00%
AAPL $121.31 -0.87%
FB $95.97 0.80%
GOOG $631.53 -0.17%
TSLA $267.12 0.12%

Markets

Chart of I:DJI
DOW 17,753.70 +7.72 0.04%
S&P 500 2,112.26 +3.63 0.17%
NASDAQ 5,147.3050 +18.52 0.36%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs