Is El Pollo Loco Holdings, Inc. overvalued or undervalued?

As of 1 May 2025, the valuation grade for El Pollo Loco Holdings, Inc. has moved from expensive to very expensive, indicating a significant shift in its perceived market value. The company is currently overvalued, with a P/E ratio of 13, which is notably lower than peers such as BJ's Restaurants, Inc. with a P/E of 44.62 and First Watch Restaurant Group, Inc. at 54.78. Additionally, the EV to EBITDA ratio stands at 7.44, further highlighting the disparity when compared to its peers.
In terms of financial performance, El Pollo Loco's ROCE is 11.53% and ROE is 9.55%, which, while respectable, do not justify its current valuation levels. The company’s recent stock performance shows a 1-month return of 21.14%, outperforming the S&P 500's 3.83% return, but this does not alleviate concerns regarding its long-term valuation. Overall, El Pollo Loco Holdings, Inc. appears to be overvalued based on its current financial metrics and peer comparisons.