DineEquity (NYSE: DIN) and El Pollo Loco Holdings (NASDAQ:LOCO) are both small-cap retail/wholesale companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, risk, valuation, earnings and dividends.

Institutional & Insider Ownership

92.0% of DineEquity shares are held by institutional investors. Comparatively, 77.2% of El Pollo Loco Holdings shares are held by institutional investors. 2.2% of DineEquity shares are held by company insiders. Comparatively, 45.9% of El Pollo Loco Holdings shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

DineEquity pays an annual dividend of $3.88 per share and has a dividend yield of 8.6%. El Pollo Loco Holdings does not pay a dividend. DineEquity pays out 86.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. El Pollo Loco Holdings has raised its dividend for 2 consecutive years.

Valuation and Earnings

This table compares DineEquity and El Pollo Loco Holdings’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
DineEquity $621.56 million 1.30 $234.57 million $4.48 10.05
El Pollo Loco Holdings $393.64 million 1.22 $62.17 million $0.46 26.96

DineEquity has higher revenue and earnings than El Pollo Loco Holdings. DineEquity is trading at a lower price-to-earnings ratio than El Pollo Loco Holdings, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

DineEquity has a beta of 0.4, suggesting that its stock price is 60% less volatile than the S&P 500. Comparatively, El Pollo Loco Holdings has a beta of 0.36, suggesting that its stock price is 64% less volatile than the S&P 500.

Profitability

This table compares DineEquity and El Pollo Loco Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
DineEquity 13.02% 38.34% 4.35%
El Pollo Loco Holdings 4.66% 9.56% 5.52%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for DineEquity and El Pollo Loco Holdings, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
DineEquity 0 4 3 0 2.43
El Pollo Loco Holdings 0 4 1 0 2.20

DineEquity presently has a consensus target price of $57.00, indicating a potential upside of 26.55%. El Pollo Loco Holdings has a consensus target price of $14.33, indicating a potential upside of 15.59%. Given DineEquity’s stronger consensus rating and higher probable upside, analysts clearly believe DineEquity is more favorable than El Pollo Loco Holdings.

Summary

DineEquity beats El Pollo Loco Holdings on 12 of the 17 factors compared between the two stocks.

DineEquity Company Profile

DineEquity, Inc., through its subsidiaries, owns and franchises the Applebee’s Neighborhood Grill & Bar (Applebee’s) concept in the bar and grill segment within the casual dining category of the restaurant industry, and owns, franchises and operates the International House of Pancakes (IHOP) concept in the family dining category of the restaurant industry. It operates through four segments: Franchise operations, Rental operations, Company restaurant operations and Financing operations. As of December 31, 2016, it had 3,749 restaurants. Applebee’s menu features a selection of grill and bar fare, such as appetizers, bar snacks, burgers, classic entrees and lighter fare, as well as cocktails, beers and desserts. As of December 31, 2016, IHOP franchise and area license restaurants were located in all 50 states within the United States, in the District of Columbia, in three United States territories and in 10 countries outside of the United States.

El Pollo Loco Holdings Company Profile

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.

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