Guzman Y Gomez shares fall -11% on latest earnings – is this the first real falter for GYG?

Guzman Y Gomez (ASX:GYG) listed on the ASX last year to much fanfare, and to much scrutiny – the company intends to challenge McDonald’s by building out a thousand stores in Australia. It also has a market cap of $4B.

From the outset, there were concerns the company was overvalued when it hit the bourse; this was exacerbated when prices dropped to around $25/sh after listing at $30/sh.

But then the stock bounced back around September last year, and the stock has been around or over $40/sh since around late November 2024. Earlier this week, that price was $45/sh.

But its Friday half yearly earnings report has left investors with a bad taste in their mouth – the stock fell -11% in late morning trades to $40.18 even though the stock had good news for its profit forecasts.

What could be an issue is the rate of expansion with which Guzman Y Gomez is expecting to justify its $4B market cap.

Over the first half of FY15, Guzman added 16 new stores in Australia Remember, this is a stock that wants to take on McDonalds.

While it’s hardly this easy to measure and know exactly, we can assume that the yearly expansion rate for stores might look like 32 new stores per year. Interestingly, 32 new restaurants were approved in 1HFY25.

At least one HotCopper user calculated it would take decades for the company to get to a point where its market cap starts to look justified.

That said, profits are climbing – profits of $7.3M were clocked in 1HFY25, up 91.2% vs pcp. But then again, $7.3M in profits hardly justify a $4B market cap – though, clearly, the stock has some shareholders with a lot of conviction.

CapEx was also twice as high vs pcp at $21.4M.

This all comes as the company reports its $12 Chicken Mini Meal is particularly popular; that GG Delivery is growing since it was launched last July, and that the company’s breakfast offerings are becoming popular.

The company also says it will only impose “modest price increases” on its customers.

GYG last traded at $40.18/sh.

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