Stifel Likes El Pollo LoCo's 'Company Story' But Doesn't See Upside

Stifel is one of five analysts to start coverage of El Pollo LoCo (NASDAQ: LOCO) as the analyst quiet period ends. Stifel has a Hold rating and $30 fair value on the stock.

"We are extremely supportive of the LOCO ‘Company Story’ (its strong, operations-focused management team) and the LOCO 'Concept Story,'" writes Stifel analyst Paul Westra.

"We are bullish on the QSR-Plus space in general, which can offer fast-casual quality at QSR prices/speeds," says Westra. "Chains like Chipotle teaching Americans that high-quality, dinner-centric meals can in fact be obtained at counter-service restaurants."

Related Link: El Pollo LoCo Sells Off As Analysts Step In 

El Pollo LoCo, specifically, benefits from a strong management team and private equity investment in operational systems.

Although Westra likes El Pollo LoCo’s growth story, he thinks the upside is already built into shares. Sifel values LoCo’s existing business at $10 per share, based on 15 times forward earnings.

Futures units are valued at $20. This figure assume El Pollo Loco can open 1,500 locations with approximately 14 percent ROE per location.

Shares of El Pollo LoCo were last trading at $31, down 6.6 percent in Tuesday's pre-market session.