El Pollo Loco Holdings, Inc. (LOCO) stock intrinsic value fair value estimate & owner earnings analysis

El Pollo Loco operates and franchises quick-service restaurants selling fire-grilled citrus-marinated chicken. At the end of 2025 there were 503 restaurants: 175 company-operated and 328 franchised, 392 of them in California. FY2025 revenue was $490.0 million, of which $405.8 million was sales at company-operated restaurants; the rest is royalties, rent and other franchise revenue. System-wide sales were $1,125.4 million. How we measure earnings. We start from operating cash flow and deduct working-capital swings, stock-based compensation (a real cost to shareholders) and the part of capital spending needed just to keep restaurants running. Spending on new restaurants is treated as growth, not upkeep, using the company's ten-year average of capital spending to revenue (about 5.15%). On this basis, owner earnings were $22.6 million in FY2025 ($0.77 per diluted share), $19.8 million in FY2024, $17.1 million in FY2023 and $20.0 million in FY2022. We use the median of FY2022 to FY2025, $19.9 million, or about $0.66 per share on the 29.96 million shares outstanding in March 2026. Earlier years are excluded: FY2018 and FY2019 were distorted by a $36.7 million build-up and then a $20.2 million release of accrued liabilities that we did not trace to a single cause; FY2020 was flattered by capital spending cut to $6.7 million during COVID; and FY2016-FY2017 came from a heavier new-build era with tax-receivable-agreement payments and large impairments. FY2025 was also a 53-week year, so its $22.6 million is not used as the base level. Growth check. Owner earnings per share rose about 17% in FY2025 (from $0.66 to $0.77), helped by the extra week, lower working-capital drag and a lower share count. We assume only 1% for year 1 of the base case, below that recent rate. Trading trends do not support more: FY2025 system-wide comparable sales rose just 0.1%, with transactions down 0.6% (down 1.8% at company-operated restaurants) and higher menu prices covering the gap. What is credited as growth. The restaurant count rose from 479 at the end of 2020 to 503 at the end of 2025, roughly 1% a year, funded from the company's own cash flow and mostly through franchisees. We credit that pace, and no more, in the base case. Management's plan for 2026 (3 to 4 company and 15 to 16 franchise openings), a return to the 2.8% comparable-sales growth of 2024, and any margin recovery are not credited in the base case because they have not yet happened. Base case (about $12.00 per share). Owner earnings of about $0.66 per share grow 1% a year for ten years, then hold flat. The flat period rests on a brand that has kept operating through COVID, on royalty income from 328 franchised restaurants, and on 20-year site leases with renewal options. No further growth is assumed beyond year 10. Bear case (about $7.00 per share). Starts from the FY2023 low of $17.1 million (about $0.57 per share) and shrinks 4% a year for ten years, then holds flat. The named risks are the traffic decline already visible in 2025, cost pressure on a business concentrated in California, and the company's $150 million revolving credit facility, on which $51.0 million was drawn at year-end and which matures July 27, 2027. Refinancing on tighter terms would take more of the cash flow. Covenants on lease-adjusted leverage and fixed-charge coverage were met at the end of 2025, and the filing notes weaker results could pressure them. Bull case (about $15.90 per share). Starts from the FY2025 level of $22.6 million (about $0.75 per share) and grows 3% a year for ten years, then holds flat. The levers are ones the company has already pulled: menu pricing (average check up 2.1% at company restaurants in 2025), the 2.8% comparable-sales gain in 2024, and franchisee openings that rose from 2 in 2024 to 8 in 2025. What would make this wrong. Continued transaction declines would move results toward the bear case. Debt is modest against earnings, but interest was $3.9 million in 2025, and the revolver must be renewed within about a year. The tax-receivable-agreement payments, which weighed on cash flow in 2017-2020, have not appeared in the 2025 cash flow statement. No cash or net-debt adjustment is applied to any case; interest is already deducted in the cash flows used. The margin-of-safety price is set near the bear case because the company is a stable, simple business but has weak traffic, a concentrated California market and a revolver coming due in 2027.