El Pollo Loco Soars in the Healthy Eating Space with Impressive Earnings
El Pollo Loco (LOCO) competes in the lucrative healthy eating segment of the restaurant industry, a market that’s increasingly gaining traction. Currently holding a Zacks Rank of #1 (Strong Buy), the company is projected to achieve double-digit earnings growth this year and next.
As a prominent player in the fire-grilled chicken sector, El Pollo Loco is celebrated for its health-focused menu that features authentic Mexican flavors. The chain operates 495 restaurants, which include both company-owned and franchised locations across California, Texas, and other states, along with 10 licensed restaurants in the Philippines.
With a market capitalization of $373 million, El Pollo Loco is classified as a small-cap company.
Double Pollo Fit Bowls Make a Comeback for 2025
On December 12, 2024, El Pollo Loco revealed the return of its highly-anticipated Double Pollo Fit Bowls for a limited time. The offerings will feature two flavors: Classic and Street Corn.
Each bowl packs over 50 grams of protein and includes quality ingredients such as avocado and spinach, catering to health-conscious customers. Priced starting at $10.99, these bowls will be served through February 19, 2025, aligning perfectly with many New Year’s wellness resolutions.
Strong Earnings Report in Third Quarter 2024
El Pollo Loco succeeded again in its third quarter earnings report, announced on October 31, 2024, with earnings of $0.21, surpassing the Zacks Consensus estimate of $0.17 by $0.04. This marks the 11th consecutive quarter the company has either met or exceeded expectations, with only one miss in the past five years—an impressive resilience, notably during the 2020 pandemic.
Sales totaled $120.4 million, consistent with the third quarter of 2023, while comparable restaurant sales rose by 2.7%, a vital metric in the industry. Furthermore, restaurant-level margins improved by 230 basis points to reach 16.7%.
El Pollo Loco’s proactive approach to debt management is evident, as the company paid down $11 million on its 2022 senior-secured revolving credit facility. By September 25, 2024, its outstanding debt stood at $76 million, with $7.9 million in liquid assets.
During the latest quarter, the company repurchased 92,043 shares for $1.1 million as part of its ongoing share repurchase program. Post these transactions, approximately $3.1 million remained in the program’s budget.
Additionally, after the quarter closed, El Pollo Loco reduced its debt by another $5 million, lowering its outstanding borrowings to $71 million as of October 31, 2024.
Analysts Forecast Earnings Growth for 2024 and 2025
Reflecting the company’s optimistic outlook, analysts have adjusted their earnings estimates upward. In the last 60 days, projections for the 2024 earnings have been raised, enhancing the Zacks Consensus estimate from $0.80 to $0.83, translating to an impressive 16.9% growth from last year’s earnings of $0.71.
For 2025, three estimates have also been revised upward, with the Zacks Consensus now anticipating earnings of $0.93, indicating a further 12.9% growth.
The outlook for 2026 suggests continued expansion, as illustrated in the following charts.
Image Source: Zacks Investment Research
Market Pullback: Is This a Good Time to Invest in El Pollo Loco?
After a strong recovery from its 2023 lows, El Pollo Loco’s stock has recently retraced and is currently underperforming compared to the Russell 2000 index.
Image Source: Zacks Investment Research
At present, shares are appealing, trading at 15 times forward earnings with a price-to-book ratio of 1.5. Generally, a price-to-book ratio below 3.0 signifies value. Moreover, its price-to-sales ratio stands at 0.8, indicating that investors receive a dollar’s worth of sales for only $0.80.
For those in search of a small-cap restaurant company steadily expanding beyond its core markets, El Pollo Loco is a contender worth considering.
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El Pollo Loco Holdings, Inc. (LOCO) : Free Stock Analysis Report
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