Guzman y Gomez shares rocket 36% on IPO day

guzman y gomez shares rocket 36% on ipo day

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price

Guzman y Gomez Limited (ASX: GYG) shares have started life as a listed company with an almighty bang.

After commencing trade at midday with an IPO listing price of $22.00, the quick service restaurant (QSR) operator's shares opened 36% higher at $30.00. This values the company at over $3 billion.

Investors don't appear fazed by some analysts declaring the Mexican food chain as expensive compared to peers Collins Foods Ltd (ASX: CKF) and Domino's Pizza Enterprises Ltd (ASX: DMP).

Nor are they bothered by concerns over how Guzman y Gomez treats its lease liabilities or the mixed track record for private equity IPOs.

Guzman y Gomez shares have strong start

Judging by the way that Guzman y Gomez shares have burst out of the gates, it seems that investors are buying into management's growth plans.

Guzman y Gomez's revealed that its growth strategy is centred around new restaurant openings in Australia, existing restaurant sales growth, margin improvement, digital initiatives, and international growth.

In respect to the former, the company advised that new restaurant openings in Australia are expected to be the primary contributor to its network sales growth over the long term. It believes there is an opportunity to grow its network to more than 1,000 restaurants in Australia over the next 20+ years. This compares to the 185 restaurants that it operates across the country today.

Supporting this expansion is its belief that it has substantially built the team, restaurant pipeline, and infrastructure to be able to open 30 new restaurants per year over the near-term. It also sees scope to increase this to 40 new restaurant openings per year within 5 years.

Management also sees the United States as a growth opportunity given the large size of its QSR market.

However, it is taking a measured approach to its expansion in the United States and anticipates opening up to three additional corporate restaurants in the Greater Chicago region in FY 2025. It currently operates four restaurants in the country.

But management has warned that while it believes there is a large growth opportunity in the United States due to the size of the market, it will continually assess and adjust the pace and extent of new restaurant expansion having regard to the financial and operational performance of existing restaurants. After all, there is significant competition in the QSR industry and existing players in the same space, such as Chipotle (NYSE: CMG), already have significant brand equity and large footprints.

Earnings forecasts

It is fair to say that Guzman y Gomez has very skinny margins at present.

For example, in FY 2023, it reported revenue of $259 million and a profit after tax of $3 million, representing a profit margin of 1.16%.

In FY 2024, revenue is expected to increase to $339.7 million with a profit after tax of $3.4 million. After which, revenue of $428.2 million is forecast for FY 2025, with a profit after tax of $6 million. The latter will mean a profit margin of just 1.4%.

It certainly will be interesting to see how the company and its shares fare in the coming years once the IPO magic wears off.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 5 May 2024

More reading

    Motley Fool contributor James Mickleboro has positions in Collins Foods and Domino’s Pizza Enterprises. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Chipotle Mexican Grill and Domino’s Pizza Enterprises. The Motley Fool Australia has recommended Chipotle Mexican Grill, Collins Foods, and Domino’s Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

    OTHER NEWS

    28 minutes ago

    Spotify Stock Pops On Quarterly Numbers As Music Streamer Adds Premium Subscribers, Lowers Costs

    28 minutes ago

    U.S. favored to top medal table at Paris Games. China may challenge for most gold

    28 minutes ago

    Durant misses exhibition finale but will stay on Team USA

    28 minutes ago

    George Conway Describes Simple Strategy That He Thinks Will Lead To Trump's Defeat

    28 minutes ago

    Regional Australians have opened their hearts to refugees – we should open pathways to match

    28 minutes ago

    Dacia Sandero is Europe’s best-selling car in 2024… so far

    28 minutes ago

    "What we've learned with USA Basketball is that the gap has closed" - Steve Kerr admits the close win over South Sudan was a wake-up call

    28 minutes ago

    A new era for visa-free travel? The EU is about to stamp it out

    28 minutes ago

    Nintendo World Championship: NES Edition feels like Nintendo for the TikTok era

    28 minutes ago

    "You can't set a gold standard to bronze standards" - Austin Reaves blasts Bronny James critics

    28 minutes ago

    PGA Tour winner and announcer Mark Carnevale dies at 64 - one week after covering his final tournament

    28 minutes ago

    Video: Instant karma for road rage driver as he punches motorist through van window - but then gets a taste of his own medicine when his victim gets out to reveal himself as being much bigger before he knocks him to the floor

    28 minutes ago

    GTA 6 won’t be ‘wildly different’ from GTA 5 says ex-Rockstar developer

    28 minutes ago

    Brazilian art student swaps Civil War coin at British Museum in colonial artefacts protest

    28 minutes ago

    Porsche cuts sales outlook due to surprise alloy shortage, shares skid

    28 minutes ago

    Windrose plans truck assembly in U.S. in rare move by Chinese EV firm

    28 minutes ago

    How We'd Spec It: 2025 Ford Mustang GT and Dark Horse

    28 minutes ago

    What’s the minimum I need to invest every month to earn a meaningful passive income?

    28 minutes ago

    SAP shares surge as job-cut plan now seen impacting up to 10,000 workers

    28 minutes ago

    An early look at the 2025 men's major championship golf venues

    28 minutes ago

    Walkway collapses in massive housing project in southern Italy, killing 2 and injuring a dozen

    28 minutes ago

    Chef’s 20p to stop jars going mouldy in cupboard - and you already have it

    28 minutes ago

    Snoop Dogg Announced As Olympic Flame Torchbearer Ahead Of Opening Ceremony

    28 minutes ago

    ‘Bridgerton’ Boosts Netflix On Nielsen’s June Chart Of Media Distributors, But Disney Remains On Top

    28 minutes ago

    Prime Video Updates User Experience, Saying Its New Look Will Help Customers “Quickly Find Something To Watch”

    28 minutes ago

    Israel’s Netanyahu visiting U.S. amid political tensions. What to know

    28 minutes ago

    They're slimy and they're toxic and the rain in Houston could bring them out -- invasive hammerhead flatworms

    28 minutes ago

    5 Times The Marvel Cinematic Universe Got Away With Nudity

    28 minutes ago

    'The Last Five Years' starring Nick Jonas and Adrienne Warren gets opening date on Broadway

    28 minutes ago

    The two rebellions Labour could face in Parliament today

    28 minutes ago

    Rapper Snoop Dogg to carry Olympic torch ahead of Paris opening ceremony

    28 minutes ago

    Workplace deaths: Man killed while tree lopping near powerline as second worker dies in Donnybrook

    28 minutes ago

    Five Below's New Home Furniture Finds Scream 'Bougie on a Budget'

    28 minutes ago

    F1 Belgian Grand Prix: Sergio Pérez’s last stand and other burning questions

    28 minutes ago

    Summer sun coming for the economy says influential City forecast

    28 minutes ago

    From Charli XCX to Hailey Bieber: how the once divisive jorts became a wardrobe staple

    28 minutes ago

    Table Tennis-GoFundMe helps American Jha fulfill Olympic dream

    28 minutes ago

    Yeo Siew Hua mystery is first S’pore film to compete for Venice Film Festival’s Golden Lion

    28 minutes ago

    Digitalised mobilisation among winning ideas at S’pore defence innovation symposium

    28 minutes ago

    Ask an Advisor: I'm Already Retired But I've Been Converting $10k at a Time From My 401(k) to an IRA. Is This Wise?

    ALONGWALKER VIETNAM: Kênh khám phá trải nghiệm của giới trẻ, thế giới du lịch ALONGWALKER INDONESIA: Saluran untuk mengeksplorasi pengalaman para pemuda global