Guzman y Gomez Drives Investor Excitement with Strong Sales Growth

Highlights:

• Impressive Sales Growth: Guzman y Gomez (ASX: GYG) reported a 20.7% increase in total sales for the September quarter, reaching $278.8 million, with comparable sales in Australia rising by 8.7% to $260.2 million.
• Strong Future Projections: The company is on track to achieve its prospectus forecast of $428.2 million in revenue for the 2025 financial year, alongside plans for 31 new store openings across Australia.
• Valuation Concerns: Despite the positive sales performance, Guzman y Gomez’s valuation has surged to 63 times pro forma EBITDA, raising concerns among investors about the sustainability of its $3.85 billion market cap, which values each of its 226 restaurants at over $17 million.

Market Reaction to Trading Update

Guzman y Gomez (ASX: GYG) has captivated investors with its latest trading update, showcasing impressive growth four months post-IPO. Total sales for the September quarter surged by 20.7% to $278.8 million, with comparable sales in its core Australian market rising by 8.7% to $260.2 million. At the time of writing, Guzman y Gomez shares have climbed 72% since their debut in late June, currently trading at $37.93.

Financial Performance and Future Outlook

The co-CEO, Steven Marks, has reaffirmed that the company is on track to meet its prospectus forecasts for the 2025 financial year, targeting revenue of $428.2 million alongside plans for 31 new store openings across Australia. Approximately 35% of network sales contribute to Guzman y Gomez's revenue after franchisee deductions, indicating an estimated revenue of $98 million for the September quarter.

Valuation Concerns Amid Rapid Growth

While these figures typically excite investors, concerns linger about Guzman y Gomez’s current valuation. The company's pre-IPO valuation of 32.5 times pro forma EBITDA has escalated to an astounding 63 times, reflecting a market capitalization of $3.85 billion. This valuation implies that each of its 226 restaurants is worth over $17 million, a point that has led to divided opinions among Australian investors regarding the sustainability of such a premium.

In summary, Guzman y Gomez's strong performance demonstrates the company’s growth potential, yet its soaring valuation raises questions about future expectations in a competitive market.

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