Del Taco Restaurants Starts Summer Sprint Eat

Written by GSCR Staff   
Thursday, 07 July 2016 07:02

The Brexit panic of 2016 seems to have come and gone faster than you can say fish-n-chips, so now what? It may be time to look for some oversold downtrodden stocks for summer picks.

We have been following Del Taco Restaurants, Inc. (NASDAQ – TACO - $8.91) for quite a while looking for a buying opportunity. As of the start of trading last Wednesday the stock’s RSI was 38, a bullish signal. The stock popped 4% that same day. Below is the one-year chart that illustrates the stock is coming out of a 52-week bottom and it may be time to buy.

TACO 1-Year Chart

(Source: www.otcmarkets.com)

MM.07.07.16.TACO-1yr

Founded in 1964 in Southern California, Del Taco is the nation's second largest Mexican Quick Service Restaurant chain. The Company specializes in Mexican and American favorites prepared fresh in every restaurants' working kitchen and they are made with fresh ingredients like cheddar cheese grated from 40-lb blocks, hand chopped pico de gallo, fresh sliced avocado, slow cooked beans made from scratch, and fresh-grilled marinated chicken and carne asada steak. In July 2016, Del Taco reinvigorated its UnFreshing Believable® marketing campaign to further communicate its commitment to serve guests everything that they love, including choosing not to choose between tacos and fries, fresh prep and fair price, or great tasting food and the convenience of a drive thru. The Company operates nearly 550 restaurants in 16 states, and serves more than three million guests each week.

Del Taco currently has a forward P/E of 14.6 versus a trailing metric of 22 on Wall Street analysts’ forecast of 5.5% increase in revenue for FY2016 to $445 million. Additionally, the Company has an impressive operating margin of 9.7% which is above the industry average of 9%. Finally, Enterprise Value to EBITDA is a low 8.2, a strong indicator of a solid target from a potential buyer.

Del Taco continues to innovate and update its menu. Last week it re-introduced the Del Taco, a larger version of the original, and last month it introduced the Bacon Ranch Chicken Avocado Epic Burrito. Additionally, TACO was added to the Russell 3000 Index last week as well. We think the stock climbs back to $12 by the middle of Q4 this year.

Have a great day!

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