Guzman Y Gomez (ASX: GYG) shares are taking a tumble today.
Again.
Shares in the S&P/ASX 200 Index (ASX: XJO) Mexican fast food restaurant chain closed yesterday trading for $19.18. In early afternoon trade on Thursday, shares are changing hands for $18.46 apiece, down 3.8%.
For some context, the ASX 200 is down 1.1% at this same time.
Unfortunately for longer-term stockholders, today's underperformance is not unusual.
Indeed, with today's intraday losses factored in, Guzman Y Gomez shares are down a painful 43.6% since this time last year.
The ASX 200 stock did pay two fully franked dividends over the year, totalling 20 cents a share. But a 1.1% trailing dividend yield doesn't come close to making up for those capital losses.
By now, even those investors who were able to take part in the initial public offering (IPO) on 20 June 2024 are sitting on losses.
IPO investors were able to pick up shares for $22.00. By the end of the first trading day on the ASX, the stock had surged to $30.00 a share.
By early December of 2024, Guzman Y Gomez shares had surged to $43.35 each. But it's been mostly downhill since then.
And looking ahead, Red Leaf Securities' John Athanasiou believes shares could have further to fall (courtesy of The Bull).
Image source: Getty Images
Time to sell Guzman Y Gomez shares?
"GYG is a Mexican themed restaurant chain," Athanasiou said. "We retain a sell rating despite Australian brand strength."
Athanasiou cited concerns about the company's growth plans in the United States as potentially hampering Guzman Y Gomez shares.
"Expansion in the United States is in its early stages and carries execution risk. Challenges include increasing labour costs, operating costs and competition," he said.
Athanasiou added, "Revenue and profit growth were overshadowed by share price weakness after the company released its first half result in fiscal year 2026 on February 20."
Indeed, Guzman Y Gomez shares crashed 13.9% on 20 February. And that came after the company reported a 23.3% year on year increase in half year underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) of $33.0 million.
Market expectations were clearly high, with the stock selling off despite Guzman Y Gomez achieving a 44.9% year on year increase in reported net profit after tax (NPAT) $10.6 million.
"In our view, investors are paying a premium for ambitious long term store targets. In a higher cost-of-capital environment, the valuation leaves little margin for error," Athanasiou concluded.
