Guzman y Gomez sell a mouthwatering breakfast burrito

Guzman y Gomez (ASX:GYG) is well-funded to support growth

Stuart Roberts from Stocks Down Under expresses a strong view on Guzman y Gomez (ASX: GYG), highlighting the company’s robust financial position and significant growth potential. Roberts points out that Guzman y Gomez holds approximately $282 million in cash, with $100 million allocated to a share buyback. He notes this substantial liquidity does not hinder the brand’s aggressive rollout of new stores, both domestically and internationally. With plans to open 98 new stores within a short time frame, including 32 in Australia and several in Japan, Singapore and the US, Roberts indicates Guzman y Gomez is scaling efficiently and innovatively in the fast casual dining sector.

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GYG could go back up to more than $30 again

Roberts regards Guzman y Gomez as a leading franchise in its category, exemplified by strong same-store sales growth of around 7%—well above the sector average. Despite the share price moderating post-results, he suggests this growth is well reflected in current valuations and maintains a contrarian stance, hinting a price above $30 is possible in the medium term. Roberts also praises the company’s focus on menu innovation and operational excellence, attributing much of its success to its product appeal and scalability.

Potential risks, Roberts states, include shifting consumer tastes and a downturn in discretionary spending. He notes Guzman y Gomez’s cautious overseas expansion and capital-light approach distinguish it from other fast food expansions, citing Domino’s (ASX: DMP) as a cautionary contrast.

Check out Stuart’s interview on AusBiz here!

Disclosure: Stuart Roberts owns shares in GYG.