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LOCO vs. QSR: Which Stock Should Value Investors Buy Now?

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Investors interested in Retail - Restaurants stocks are likely familiar with El Pollo Loco Holdings (LOCO) and Restaurant Brands (QSR - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Currently, El Pollo Loco Holdings has a Zacks Rank of #2 (Buy), while Restaurant Brands has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that LOCO is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

LOCO currently has a forward P/E ratio of 22.31, while QSR has a forward P/E of 24.36. We also note that LOCO has a PEG ratio of 2.23. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. QSR currently has a PEG ratio of 2.63.

Another notable valuation metric for LOCO is its P/B ratio of 2.36. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, QSR has a P/B of 4.81.

Based on these metrics and many more, LOCO holds a Value grade of B, while QSR has a Value grade of D.

LOCO stands above QSR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that LOCO is the superior value option right now.

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