Critical Review: El Pollo LoCo (LOCO) versus Carrols Restaurant Group (TAST)

El Pollo LoCo (NASDAQ: LOCO) and Carrols Restaurant Group (NASDAQ:TAST) are both small-cap retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, earnings, dividends, profitability, risk, valuation and analyst recommendations.

Analyst Recommendations

This is a breakdown of current recommendations for El Pollo LoCo and Carrols Restaurant Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
El Pollo LoCo 0 3 1 0 2.25
Carrols Restaurant Group 0 0 5 0 3.00

El Pollo LoCo presently has a consensus price target of $12.25, suggesting a potential upside of 13.43%. Carrols Restaurant Group has a consensus price target of $15.50, suggesting a potential upside of 23.51%. Given Carrols Restaurant Group’s stronger consensus rating and higher possible upside, analysts plainly believe Carrols Restaurant Group is more favorable than El Pollo LoCo.

Risk and Volatility

El Pollo LoCo has a beta of 0.3, indicating that its share price is 70% less volatile than the S&P 500. Comparatively, Carrols Restaurant Group has a beta of 0.3, indicating that its share price is 70% less volatile than the S&P 500.

Profitability

This table compares El Pollo LoCo and Carrols Restaurant Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
El Pollo LoCo 1.54% 9.19% 5.62%
Carrols Restaurant Group 0.86% 6.69% 1.92%

Valuation & Earnings

This table compares El Pollo LoCo and Carrols Restaurant Group’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
El Pollo LoCo $401.70 million 1.04 $8.61 million $0.63 17.14
Carrols Restaurant Group $1.09 billion 0.42 $7.15 million $0.20 62.75

El Pollo LoCo has higher earnings, but lower revenue than Carrols Restaurant Group. El Pollo LoCo is trading at a lower price-to-earnings ratio than Carrols Restaurant Group, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

83.6% of El Pollo LoCo shares are held by institutional investors. Comparatively, 83.8% of Carrols Restaurant Group shares are held by institutional investors. 46.0% of El Pollo LoCo shares are held by company insiders. Comparatively, 4.6% of Carrols Restaurant Group shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Summary

El Pollo LoCo beats Carrols Restaurant Group on 7 of the 13 factors compared between the two stocks.

El Pollo LoCo Company Profile

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 specializes in offering flame-grilled chicken. As of March 8, 2018, it had approximately 475 company-owned and franchised restaurants in Arizona, California, Nevada, Texas, and Utah. 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.

Carrols Restaurant Group Company Profile

Carrols Restaurant Group, Inc., through its subsidiaries, operates franchisee restaurants of Burger King. As of December 31, 2017, it owned and operated 807 Burger King restaurants located in 17 states of the United States. The company was founded in 1960 and is headquartered in Syracuse, New York.

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