El Pollo Loco: Comps Strength Defies A Weaker Restaurant Industry

El Pollo Loco has surged 60%+ YTD, dramatically outperforming the S&P 500, yet fundamentals and valuation still support further upside. LOCO’s defensible niche in flame-grilled Mexican chicken and strong same-restaurant sales growth set it apart amid sector-wide comp declines. Operating margins are rising toward 20%, with higher average checks offsetting labor and food cost pressures. Despite the rally, LOCO trades at 8.0x EV/FY26 EBITDA, below peers, with upgraded guidance and room for further multiple expansion.

My core thesis for the remainder of 2026 is this: the stock market rally will have broader participation from small and mid-cap names that have missed out on the AI gains, particularly benefiting and driving rebounds