Shares in Guzman y Gomez (GYG) have experienced a sharp decline, prompting concerns about the company’s valuation despite surpassing $1 billion in revenue. According to HLB Mann Judd Sydney partner Simon James, the recent 18 per cent single-day drop may indicate both an anticipated market adjustment and deeper valuation issues. Guzman y Gomez is a fast-food chain specialising in Mexican cuisine, operating restaurants across Australia and internationally. The company recently went public, offering investors a stake in its rapidly expanding business model.
James highlighted that GYG has historically commanded a premium over its competitors, boasting revenue and EBITDA multiples significantly exceeding industry norms. He suggested that the expiration of escrowed shares, combined with an increase in short interest now at 11.4 per cent, may have exacerbated the stock’s downward trajectory. GYG’s financial performance reveals a business focused on high-growth and aggressive expansion within the competitive fast-food sector.
Despite ongoing revenue growth, rising losses and shifting market sentiment have led to caution among investors. James warned that GYG’s stock could potentially experience further downside. Investors are closely watching to see how the company balances its impressive growth with the need to achieve profitability.
On Thursday, GYG shares fell another 0.8 per cent, bringing the total losses since the start of the year to 38 per cent. Market observers will be keenly watching to see if the stock stabilises or continues to slide amid valuation concerns.