Guzman y Gomez (ASX:GYG) Strong Numbers, Brutal Sell Off, What Broke?

Revenue Up 23%, Stock Down 10%, Here’s Why

GYG was a big IPO in 2024, but since then the stock has had a volatile run. It is now down roughly 55% from earlier levels, and it fell a further 10% after today’s result.

What makes this interesting is that the operating numbers were actually strong:

Revenue was $261.2m, up 23% YoY

EBITDA was $40.9m, up 30% YoY

NPAT was $10.6m, up 45% YoY

Network sales were $681.8m, up 18% YoY

At face value, that is a very solid performance for a food chain operating in a competitive category. The business is scaling, efficiency is improving, and profitability is lifting faster than revenue, which is what you want to see as a store network matures.

So why the sell off? Our read is that expectations were still elevated. When a stock lists with a lot of hype, the bar stays high, and the market starts to demand not just growth, but perfect execution, clean margins, and confidence around the forward outlook.

Overall, we still think it looks like a solid business, but in the near term there may be further pressure if the market continues to reset expectations around what a sustainable growth and margin profile should look like.

What are the Best ASX Stocks to invest in right now?

Check our buy/sell tips

The Peter Lynch stock picker GYG

For anyone who knows the famous investor Peter Lynch, this one has a familiar feel.

It is a beaten down stock, but the fundamentals are improving. That is often the setup he liked, sentiment is ugly, the share price has already taken the pain, and the operating numbers start to tell a better story than the chart.

And for retail investors, this is where you actually have an edge. You can visit the stores, watch foot traffic, look at pricing and throughput, and get a real feel for the product and customer experience. That ability to build your own on the ground view, instead of relying only on broker notes, was a big part of his philosophy on why everyday investors can sometimes spot opportunities earlier than Wall Street.

GYG Drive Thru Expansion Rolls On, But Margins Face Pressure

Where the market’s anxiety around GYG really comes from is the quality of growth, not the headline growth.

Same store sales growth was 4.4%, down from the prior period. Even if total sales are still rising quickly because new stores are opening, the market typically pays a premium for strong comps. When comps slow, investors start asking whether the brand is maturing faster than expected, or whether competition is starting to bite.

In Australia, corporate restaurant margins slipped from 18.0% to 17.6%. Management’s explanation is reasonable, newer stores are still ramping up and that dilution can weigh on the average margin in the short term. The key is whether that margin stabilises as the cohort matures.

The bigger swing factor is the US, which is still loss making and getting worse. The US segment underlying EBITDA loss widened to $8.3m versus a loss of $5.0m previously.

US corporate GYG restaurant margin is deeply negative and deteriorated to (69.6%) from (40.8%), largely driven by new store openings and temporary cost pressures. But regardless of the reasons, this is the value driver the market will focus on. The US is a brutal competitive landscape, and investors will want to see clear signs of an inflection point, improving unit economics, tighter cost control, and a credible path to US profitability.

Where is the capital going?

Capex remained elevated as the company continues to open restaurants. Payments for purchase of PPE were $23.1m in the half, slightly higher year on year.

Management is still pushing hard on network growth. The company is on track to open 32 new restaurants in Australia in FY26, with 108 approved sites in the pipeline, and more than 85% of those sites expected to be drive thrus

The IPO Hype Hangover Isn’t Over Yet

Our view is that expectations are still very high for GYG. The business is doing what it should be doing mechanically, investing, expanding, and building capacity. But for the stock, the market is likely still in multiple reset mode. Long term investors may need to be patient, and we do not think the multiple compression story is necessarily finished yet.