Guzman Y Gomez Ltd (ASX: GYG) stock has already achieved impressive returns in a short amount of time on the ASX. Since market close on 20 June 2024, the GYG stock price has gone up more than 20%, as shown on the chart below, while the S&P/ASX 200 Index (ASX: XJO) has risen more than 6%.
I'm not expecting the Mexican food company's share price to rise another 20% in the next few months. But, financial growth could help improve the underlying value of the business. We can look at some forecasts from experts about what could happen for the company over the next few years to 2027.
The company itself is expecting to add hundreds of new GYG locations over the decades ahead. This could translate into significant sales growth, partly helped by ongoing comparable sales growth.
GYG continues to report strong sales growth. In the FY25 first quarter, the total network sales growth was 20.7%, with Australian and Asian comparable sales growth of 8.7%.
The investment bank Goldman Sachs is forecasting the Mexican fast-food business could see significant growth in the next few years.
FY25
Goldman Sachs noted in its coverage of GYG after the FY25 first quarter that the company believes it will be able to meet its prospectus forecasts for FY25, including 31 new stores in Australia.
Goldman Sachs also said that same-store sales growth is accelerating in Australia, with comparable sales growth of 7.4% in the first seven weeks of the FY25 first quarter, compared to 8.7% for the overall quarter. GYG benefited from delivery sales, particularly across the aggregators that ran recent promotional activity, which the aggregators funded.
The broker believes Guzman y Gomez can beat its prospectus numbers. In FY25, Goldman Sachs thinks GYG can generate $438.8 million of revenue, which would be an increase of 28% year over year.
Goldman Sachs also suggests that the operating profit (EBITDA) could reach $65.3 million and that the business could generate 14 cents of earnings per share (EPS).
FY26
Strong sales growth could continue into the 2026 financial year, according to the broker's estimates.
Goldman Sachs forecasts that Guzman y Gomez could generate A$548.3 million of revenue in the 2026 financial year, which would represent a 25% increase year over year.
Profit margins at the business are expected to increase, which could help EBITDA jump 40% to $91.2 million and EPS rise 78% to 25 cents.
FY27
The broker is expecting the 2027 financial year to be an even stronger period for GYG.
Looking at the broker's estimates, Guzman y Gomez could deliver spicy revenue growth of 22% to $669 million. EBITDA could rise 36% to $124.3 million, suggesting a further increase of the EBITDA margin if the operating profit keeps growing faster than revenue.
Goldman Sachs suggests that GYG's EPS could jump 68% to 42 cents in the 2027 financial year.
Negative view on Guzman y Gomez stock
While Goldman Sachs is expecting the Mexican food business to keep growing its sales and operations, it's pessimistic on the company due to the high valuation, so its rating is currently a sell. Goldman Sachs said:
While we forecast top-line growth and margin expansion, the basis of our Sell thesis is centered on 1) an overly ambitious long-term store expansion profile that has no recent successful precedent in the Australian market; and 2) a stretched valuation that has inappropriately, in our view, been pegged to the highest growth US-peers without taking into consideration the market differences and risks associated with an aggressive store expansion. Separately we note an overhang exists with c.13% of total shares expected to be released from escrow in March 2025.
