Intrinsic value of El Pollo Loco Holdings - LOCO

Previous Close

$9.50

  Intrinsic Value

$18.65

stock screener

  Rating & Target

str. buy

+96%

Previous close

$9.50

 
Intrinsic value

$18.65

 
Up/down potential

+96%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of LOCO stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of El Pollo Loco Holdings (LOCO) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.04
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
Revenue, $m
  380
  400
  420
  442
  465
  489
  514
  540
  568
  596
  627
  658
  692
  727
  764
  802
  842
  885
  929
  976
  1,025
  1,077
  1,131
  1,188
  1,247
  1,310
  1,375
  1,444
  1,517
  1,593
  1,673
Variable operating expenses, $m
 
  344
  360
  378
  396
  415
  435
  456
  478
  501
  525
  525
  552
  580
  609
  640
  672
  706
  741
  778
  818
  859
  902
  947
  995
  1,044
  1,097
  1,152
  1,210
  1,270
  1,334
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  345
  344
  360
  378
  396
  415
  435
  456
  478
  501
  525
  525
  552
  580
  609
  640
  672
  706
  741
  778
  818
  859
  902
  947
  995
  1,044
  1,097
  1,152
  1,210
  1,270
  1,334
Operating income, $m
  35
  56
  60
  65
  69
  74
  79
  84
  90
  96
  102
  133
  140
  147
  155
  162
  171
  179
  188
  198
  208
  218
  229
  241
  253
  265
  279
  293
  307
  323
  339
EBITDA, $m
  51
  88
  92
  97
  102
  107
  113
  119
  125
  131
  138
  145
  152
  160
  168
  176
  185
  195
  204
  215
  225
  237
  249
  261
  274
  288
  302
  318
  333
  350
  368
Interest expense (income), $m
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
Earnings before tax, $m
  31
  52
  56
  60
  64
  69
  73
  78
  83
  89
  94
  125
  131
  138
  144
  152
  159
  167
  175
  184
  193
  202
  212
  223
  234
  245
  257
  270
  283
  297
  312
Tax expense, $m
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  25
  34
  35
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  69
  73
  77
  80
  84
Net income, $m
  18
  38
  41
  44
  47
  50
  54
  57
  61
  65
  69
  91
  96
  100
  105
  111
  116
  122
  128
  134
  141
  148
  155
  163
  171
  179
  188
  197
  207
  217
  228

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  471
  494
  519
  546
  574
  603
  634
  667
  701
  736
  774
  813
  854
  897
  943
  990
  1,040
  1,092
  1,147
  1,205
  1,266
  1,329
  1,396
  1,466
  1,540
  1,617
  1,698
  1,783
  1,873
  1,966
  2,065
Adjusted assets (=assets-cash), $m
  469
  494
  519
  546
  574
  603
  634
  667
  701
  736
  774
  813
  854
  897
  943
  990
  1,040
  1,092
  1,147
  1,205
  1,266
  1,329
  1,396
  1,466
  1,540
  1,617
  1,698
  1,783
  1,873
  1,966
  2,065
Revenue / Adjusted assets
  0.810
  0.810
  0.809
  0.810
  0.810
  0.811
  0.811
  0.810
  0.810
  0.810
  0.810
  0.809
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
Average production assets, $m
  174
  183
  192
  202
  212
  223
  235
  247
  259
  273
  286
  301
  316
  332
  349
  367
  385
  404
  425
  446
  469
  492
  517
  543
  570
  599
  629
  660
  693
  728
  764
Working capital, $m
  -31
  -35
  -37
  -38
  -40
  -43
  -45
  -47
  -49
  -52
  -55
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -89
  -94
  -98
  -103
  -109
  -114
  -120
  -126
  -132
  -139
  -146
Total debt, $m
  104
  115
  126
  138
  150
  163
  176
  191
  206
  221
  238
  255
  273
  292
  312
  333
  355
  378
  402
  427
  454
  482
  511
  542
  574
  608
  643
  681
  720
  761
  804
Total liabilities, $m
  206
  217
  228
  240
  252
  265
  278
  293
  308
  323
  340
  357
  375
  394
  414
  435
  457
  480
  504
  529
  556
  584
  613
  644
  676
  710
  745
  783
  822
  863
  906
Total equity, $m
  265
  277
  291
  306
  322
  339
  356
  374
  393
  413
  434
  456
  479
  503
  529
  555
  583
  613
  644
  676
  710
  746
  783
  823
  864
  907
  953
  1,000
  1,051
  1,103
  1,158
Total liabilities and equity, $m
  471
  494
  519
  546
  574
  604
  634
  667
  701
  736
  774
  813
  854
  897
  943
  990
  1,040
  1,093
  1,148
  1,205
  1,266
  1,330
  1,396
  1,467
  1,540
  1,617
  1,698
  1,783
  1,873
  1,966
  2,064
Debt-to-equity ratio
  0.392
  0.410
  0.430
  0.450
  0.470
  0.480
  0.500
  0.510
  0.520
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.620
  0.630
  0.640
  0.650
  0.650
  0.660
  0.660
  0.670
  0.680
  0.680
  0.690
  0.690
  0.690
Adjusted equity ratio
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  18
  38
  41
  44
  47
  50
  54
  57
  61
  65
  69
  91
  96
  100
  105
  111
  116
  122
  128
  134
  141
  148
  155
  163
  171
  179
  188
  197
  207
  217
  228
Depreciation, amort., depletion, $m
  16
  32
  32
  33
  33
  33
  34
  34
  35
  35
  36
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
Funds from operations, $m
  45
  70
  73
  77
  80
  84
  87
  91
  96
  100
  105
  103
  108
  113
  119
  124
  131
  137
  144
  151
  158
  166
  174
  183
  192
  202
  212
  222
  233
  245
  257
Change in working capital, $m
  -4
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
Cash from operations, $m
  49
  72
  75
  78
  82
  86
  90
  94
  98
  102
  107
  105
  111
  116
  122
  128
  134
  141
  148
  155
  163
  171
  179
  188
  197
  207
  217
  228
  239
  251
  264
Maintenance CAPEX, $m
  0
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
New CAPEX, $m
  -37
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
Cash from investing activities, $m
  -35
  -16
  -16
  -17
  -18
  -19
  -19
  -21
  -22
  -23
  -24
  -26
  -26
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -64
Free cash flow, $m
  14
  56
  59
  61
  64
  67
  70
  73
  76
  79
  83
  80
  84
  88
  92
  97
  102
  107
  112
  118
  123
  129
  136
  143
  150
  157
  165
  173
  181
  190
  200
Issuance/(repayment) of debt, $m
  -19
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
Issuance/(repurchase) of shares, $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -18
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
Total cash flow (excl. dividends), $m
  -4
  67
  70
  73
  76
  80
  83
  87
  91
  95
  99
  97
  102
  107
  112
  118
  124
  130
  136
  143
  150
  157
  165
  173
  182
  191
  200
  210
  221
  231
  243
Retained Cash Flow (-), $m
  -20
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -55
Prev. year cash balance distribution, $m
 
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  55
  56
  58
  60
  63
  66
  69
  72
  75
  78
  75
  79
  83
  87
  91
  96
  100
  105
  111
  116
  122
  128
  134
  141
  147
  155
  162
  170
  179
  188
Discount rate, %
 
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
 
  52
  50
  50
  49
  48
  46
  45
  43
  41
  39
  33
  31
  29
  26
  24
  22
  19
  17
  14
  12
  10
  9
  7
  6
  4
  3
  3
  2
  1
  1
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
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El Pollo Loco Holdings, Inc. specializes in fire-grilling citrus-marinated chicken and operates in the limited service restaurant (LSR) segment. The Company's menu features its signature product, citrus-marinated fire-grilled chicken, and a range of Mexican-inspired entrees that it creates from chicken. Every day in every restaurant, the Company marinates and fire-grills its chicken over open flames, and hand-slices whole tomatoes, avocados, serrano peppers and cilantro to make its salsas, guacamole and cilantro dressings from scratch. The Company also offers burritos, salads, tostadas, bowls, stuffed quesadillas and chicken entrees. The Company's entrees include Chicken Avocado Burrito, Under 500 Calorie entrees, Ultimate Pollo Bowl, and Stuffed Chicken Avocado Quesadilla. As of December 28, 2016, the Company had 460 restaurants, consisting of 201 Company-operated and 259 franchised restaurants. The Company also offers additional proteins, such as shrimp, carnitas and beef.

FINANCIAL RATIOS  of  El Pollo Loco Holdings (LOCO)

Valuation Ratios
P/E Ratio 20.3
Price to Sales 1
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 7.5
Price to Free Cash Flow 30.5
Growth Rates
Sales Growth Rate 7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 19.4%
Cap. Spend. - 3 Yr. Gr. Rate 21.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 39.2%
Total Debt to Equity 39.2%
Interest Coverage 11
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital 4.9%
Ret/ On T. Cap. - 3 Yr. Avg. 7.7%
Return On Equity 7.1%
Return On Equity - 3 Yr. Avg. 16.7%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 25.5%
Gross Margin - 3 Yr. Avg. 26.4%
EBITDA Margin 13.2%
EBITDA Margin - 3 Yr. Avg. 11.2%
Operating Margin 9.2%
Oper. Margin - 3 Yr. Avg. 11.5%
Pre-Tax Margin 8.2%
Pre-Tax Margin - 3 Yr. Avg. 4.9%
Net Profit Margin 4.7%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate 41.9%
Eff/ Tax Rate - 3 Yr. Avg. 129.5%
Payout Ratio 0%

LOCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LOCO stock intrinsic value calculation we used $380 million for the last fiscal year's total revenue generated by El Pollo Loco Holdings. The default revenue input number comes from 2016 income statement of El Pollo Loco Holdings. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our LOCO stock valuation model: a) initial revenue growth rate of 5.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.7%, whose default value for LOCO is calculated based on our internal credit rating of El Pollo Loco Holdings, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of El Pollo Loco Holdings.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of LOCO stock the variable cost ratio is equal to 86.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for LOCO stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for El Pollo Loco Holdings.

Corporate tax rate of 27% is the nominal tax rate for El Pollo Loco Holdings. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the LOCO stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for LOCO are equal to 45.7%.

Life of production assets of 26.4 years is the average useful life of capital assets used in El Pollo Loco Holdings operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for LOCO is equal to -8.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $265 million for El Pollo Loco Holdings - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 39.627 million for El Pollo Loco Holdings is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of El Pollo Loco Holdings at the current share price and the inputted number of shares is $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
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JACK Jack in the Bo 87.08 6.73  str.sell
CMG Chipotle Mexic 320.96 301.00  hold
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WING Wingstop 45.73 4.80  str.sell

COMPANY NEWS

▶ El Pollo Loco Launches New Baja Shrimp Menu Items   [Feb-05-18 09:05AM  GlobeNewswire]
▶ El Pollo Loco reports 3Q loss   [05:38AM  Associated Press]
▶ Why El Pollo Loco Holdings Stock Dropped Today   [Nov-03-17 07:05PM  Motley Fool]
▶ El Pollo Loco Launches Four New Handcrafted Bowls   [Oct-09-17 09:02AM  GlobeNewswire]
▶ El Pollo Loco Launches New Fire-Grilled Chicken Burritos   [Sep-04-17 09:00AM  GlobeNewswire]
▶ El Pollo Loco beats 2Q profit forecasts   [Aug-05-17 01:12AM  Associated Press]
▶ El Pollo Loco Q2 Earnings Fall Short   [Aug-04-17 11:45AM  24/7 Wall St.]
▶ El Pollo Loco Launches New Taco Platters   [Jul-24-17 09:01AM  GlobeNewswire]
▶ El Pollo Loco to Present at Investor Conferences in June   [May-24-17 04:00PM  GlobeNewswire]
▶ El Pollo Loco beats 1Q profit forecasts   [05:02AM  Associated Press]
▶ Shake Shack Dives On Same-Store Sales; Wingstop, Del Taco, El Pollo Loco Top   [May-04-17 04:48PM  Investor's Business Daily]
▶ Retail And E-Commerce News And Stocks To Watch   [03:19PM  Investor's Business Daily]
Financial statements of LOCO
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