The Guzman Y Gomez Ltd (ASX: GYG) share price has lost some of its mojo – it's down around 40% since its peak in February 2025, as the chart below shows. It hit a 52-week low of $26.54 on Wednesday.
When there's that much of a decline for a growing business, it's definitely worth asking whether the beaten-up ASX share is an opportunity or not.
Before getting to my view on the business, let's take a look at why the market may be less optimistic on the ASX stock compared to a few months ago.
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Shorter-term profits to be weaker than expected?
In a recent note, UBS told investors that it had reduced its GYG estimates for underlying operating profit (EBITDA) in FY26 and FY27 by 1.9% and 2.8%, respectively. This is because of expected larger US losses at the EBITDA level and lower Australian EBITDA.
UBS reduced its GYG earnings per share (EPS) forecasts for FY25, FY26 and FY27 by 2.5%, 4.7% and 5.1%, respectively.
The broker said that FY25 guidance with the FY25 first-half result indicated a lower level of operating leverage than market expectations, despite strong comparable sales growth. A sales mix shift towards lower margin sales, such as breakfast and late night, as well as delivery, is expected to continue in FY26 and onwards.
UBS also noted that GYG has a consistent desire to provide value to consumers and invest in its systems to be ahead of the curve because of its "long-term perspective". UBS' expectations of an improvement of the corporate restaurant profit margin expansion and the general expenses to sales ratio has been "reduced".
The broker is now expecting Guzman Y Gomez to make net profit after tax (NPAT) of $21 million in FY26, $42 million in FY27, $67 million in FY28 and $91 million in FY29.
Is the Guzman Y Gomez share price a buy?
Despite the lowered profit projections, UBS' target price of $31 implies a possible rise of 16% over the next year
I'd always want management to do what's right for the business in the longer-term rather than focus on short-term profit.
I believe it's a good thing that GYG is rapidly growing its breakfast and late-night sales, whilst also increasing its lunch and dinner revenue too. This is a great sign that it may be capturing market share from other quick-service restaurant retailers, in my view.
Slower margin expansion isn't ideal, but I believe ongoing scaling of the business should help the margins tick higher.
Customers are clearly loving the food, which is why (comparable) sales are growing so strongly. In the FY25 third quarter, Guzman Y Gomez reported that its total network sales increased by 23.6% year-over-year.
For me, the most important elements to see are that its Australian network continues growing in size, which it is. In the FY25 third quarter, it reported its Australian network had grown by 26 locations year-over-year, with plans for the openings growth rate to accelerate in the coming years.
What I believe makes this such a compelling long-term pick is the potential to expand further overseas. In the FY25 third quarter, it reported its Singapore sales increased 34% to $16.6 million, Japan sales grew 23.5% to $2.1 million and US sales soared 23% to $3.2 million.
If the company can continue growing network sales in those three markets (and potentially other countries in the future), then I'd say this 52-week low is an appealing long-term entry point at the current the Guzman Y Gomez share price.
