Under the Spotlight: Guzman Y Gomez ($GYG)

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When former hedge fund manager Steven Marks moved from Wall St to Australia, he didn’t launch a finance firm or tech platform. Instead, he disliked the local Mexican so much, he started a burrito chain.

Since opening its first store in Sydney’s Newtown in 2006, Guzman y Gomez ($GYG) has become one of the ASX’s more surprising growth stories. With a market cap of $2.07 billion, it now sits in the S&P/ASX 200 and ranks ahead of companies like Virgin Australia ($VGN) and Bega Cheese ($BGA).

It caught investors off guard again this week. GYG shares soared 18.6% on Tuesday, their biggest one-day jump on record, after the company posted stronger-than-expected quarterly sales growth of 19.5% year-on-year.

Meanwhile, its half-year sales of $681.8M in 1H26 put the burrito chain within striking distance of Collins Foods ($CKF), the parent company of KFC Australia and, until March, Taco Bell, which reported $750.3M in half-year revenue.

But the stock market has been less enthusiastic than those numbers suggest. GYG listed at $22 in June 2024, soared on debut, then spent much of the next two years sliding as investors questioned whether the rollout story and U.S. expansion justified such a rich valuation.

Rapid rollout

Guzman’s growth comes down to how quickly it’s been able to roll out new stores. At the end of Q3 FY26, GYG had 278 restaurants globally, including 242 in Australia and eight in the U.S.

It opened five new Australian stores in the quarter and says it remains on track to open 32 local restaurants this financial year. Management has also flagged 108 approved sites in the pipeline, with more than 85% of them expected to be drive-thrus.

That pipeline helps explain why investors continue to watch GYG so closely. Guzman’s drive-thru stores are each averaging $6.9M in annual sales, with about 22% of revenue left after direct running costs. Franchised stores were showing similar margins, and an average ROI of 48%.

Revenue and profit margins are continuing to grow year-on-year. In FY25, GYG reported network sales of $1.18B and revenue of $436M. That translated to net profit (NPAT) of $14.5M – up more than 150% from the previous year.

That’s comparatively small next to established fast-food giants like Collins Foods, which reported net profit of $50.3M for FY25, excluding $40.8M in one-off impairments. But GYG is growing much faster. Collins’ profits fell 14.8% from the previous year.

The U.S. is where the story gets more speculative. Guzman is concentrating its push in Chicago, where it has eight stores and plans to reach at least 15 before expanding further.

The problem is that after six years, the U.S. business is still losing money. In February, GYG shares fell to a record low after weak U.S. sales drove that point home. In a market where Mexican chains are hardly in short supply, the U.S. segment is seen as its biggest test.

Growing appetite

The good news is that Guzman’s growth sits in a category that still has scale. Australia’s fast-food and takeaway food services industry generated $29.6 billion in revenue in 2024–25, according to IBISWorld.

Last year was also the strongest year of net store growth for Australia’s quick service restaurant (QSR) sector in at least a decade, with 250 net new outlets added across the top 36 chains, according to GapMaps. The Mexican food segment was among the fastest growing, with Guzman Y Gomez adding 27 new stores over that period, just behind KFC’s 29.

That shows Aussie consumers are still spending on convenience, even if they’ve become more selective on price and quality. That’s given GYG a useful opening. It still plays in the convenience end of the market, but with a product that feels more customisable and fresher than the legacy fast food majors.

The bigger difference is in how these businesses make money. Australia’s biggest player, McDonald’s, follows a franchise model where most of its earnings come from franchise fees and rent from restaurant operators. GYG is still earlier in its evolution: less than 16% of revenue comes from franchise and other income, with most still coming from company-run restaurant sales. Its investment case, for now, rests on opening new stores, lifting network sales and proving those stores can generate strong returns.

Spicy valuation

There’s still room for growth in the Australian market. GYG’s local footprint remains smaller than the major incumbents, and management continues to talk up site expansion. But the market is no longer rewarding growth at any price.

That has become obvious in the share price. Strong sales updates can still spark big rallies, like this week’s 18.6% jump, but the stock remains below its IPO price and well below its debut-day high. Investors seem willing to back the Australian rollout, but far less willing to pay up for an expensive overseas ambition that hasn’t yet delivered.

Its trailing price-to-earnings (P/E) ratio of 120.2 also looks rich compared to most of its peers. By comparison, Domino’s Pizza ($DMP) has a P/E of 28.44, while McDonald’s ($MCD) sits at 25.9. That suggests investors are still willing to pay a steep premium for GYG’s growth potential. It also leaves the stock vulnerable if Guzman fails to deliver.

Still, analysts seem broadly optimistic. Of the six major brokers that updated guidance this week, only one – Citi – set a price target below its current level. Ord Minnett was the most bullish, with a price target of $32, implying upside of 56%.

Is it a buy?

GYG has built one of the stronger consumer growth stories on the ASX. The Australian business is scaling, store economics look solid and the drive-thru rollout offers a credible path to further earnings growth.

The harder question is whether that’s enough for the stock. Since listing, the market has repeatedly shown it wants growth, but it also wants proof that growth can translate into a valuation it can trust. For now, GYG looks like a strong business with a share price still trying to find the right story.

This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. The author of this article and other employees of Stakeshop Pty Ltd may hold positions or have financial interests in the company (or companies) discussed above. As always, do your own research and consider seeking financial, legal and taxation advice before investing.