When Will El Pollo Loco Stock Cool Off?
August 3, 2014 by Paul Ausick
Like all things that can’t go on forever, El Pollo Loco’s rising share price will eventually slow and then stop. There’s little question that some of the share price rise is the result of (favorable) comparisons to the hottest restaurant stock of the past several years, Chipotle Mexican Grill Inc. (NYSE: CMG). Chipotle Mexican Grill’s stock has soared some 1,400% since coming public in 2006, revenue has risen by a factor of five, and the number of restaurants has tripled.
In Chipotle’s first six trading days, however, the share price slipped from an opening price of $45 a share to $44.75 after peaking at around $47.50. So there’s little question about which of the two stocks has performed better right out of the chute.
It almost seems that the comparison to Chipotle is based solely on the fact that both stores offer Mexican-influenced food. And it’s true that El Pollo Loco has learned some valuable lessons from Chipotle, like keeping things simple, fresh, and healthy. From now on, it’s a matter of execution.
Investors don’t want to miss out on a chance to get a piece of the hottest company of the past couple of weeks. It’s worth noting, however, that El Pollo Loco is using essentially all the proceeds (about $123 gross) from its IPO to pay down total debt of about $289 million.
In order to keep growing, El Pollo Loco may have to take on more debt or do a secondary offering sooner than many analysts and investors may expect. Nothing will kill a high-flying stock faster.
Shares of El Pollo Loco posted a new post-IPO high of $41.70 on Friday. The low is $18.48.
ALSO READ: States That Drink the Most Beer
Take This Retirement Quiz To Get Matched With A Financial Advisor (Sponsored)
Take the quiz below to get matched with a financial advisor today.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the
advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Take the retirement quiz right here.