Guzman Y Gomez (ASX: GYG) shares have been sizzling this week.
Shares in the S&P/ASX 200 Index (ASX: XJO) Mexican fast food restaurant chain closed last Thursday, ahead of the Easter holiday break, trading for $15.20.
Despite slipping 0.7% in intraday trade to $20.10 a share today, that sees the stock up a whopping 32.2% in less than three trading days.
While this will undoubtedly come as welcome news to recent investors, most longer-term shareholders will still be underwater.
Guzman Y Gomez shares were first available to select investors during the initial public offering (IPO) on 20 June 2024 for $22 each. The fast food stock ended that first day of trade at $30 a share, eventually peaking at $43.35 a share at market close on 6 December 2024.
Image source: Getty Images
What sent Guzman Y Gomez shares flying this week?
Investors reacted very positively to the company's third-quarter (Q3 FY 2026) sales update, released on Tuesday.
Guzman Y Gomez shares closed up a blistering 18.6% on the day after the company reported a 19.5% year-on-year increase in sales to $345.9 million.
The Mexican fast food chain opened five new Australian restaurants during the quarter. And its Australian segment delivered the bulk of its sales, at $320.4 million.
The Australian business showed significantly stronger growth than its US market. Comparable sales growth in Australia came in at 6.6% compared to 2.2% in the US, where the company opened only two new stores during the quarter.
In the US, the company pointed to headwinds from the cessation of DoorDash deliveries in early March.
Looking ahead, management confirmed that the company is on track to open 32 new restaurants in Australia in FY 2026.
Which brings us back to our headline question…
Should you buy the ASX 200 fast food stock today?
Morgans Financial's Mitch Belichovski ran his slide rule over the company on 2 April, prior to GYG's quarterly update release (courtesy of The Bull).
"Guzman Y Gomez owns, operates and franchises Mexican inspired quick service restaurants in Australia, Singapore, Japan and the United States," he noted.
"The company's premium valuation is predicated on expectations it will deliver material earnings per share growth over many years," he added.
Explaining his sell recommendation on Guzman Y Gomez shares, Belichovski said:
In our view, the company is exposed to execution risk as it aggressively continues to open new restaurants in Australia. Australian earnings were up strongly in the first half of 2026. However, segment underlying EBITDA in the United States posted a loss of $8.3 million.
Belichovski concluded, "Management will need to narrow its losses in the US and increase the pace of US expansion to ultimately deliver value for shareholders."
