A rare buying opportunity in 1 of Australia’s top shares?

I’d describe Guzman Y Gomez Ltd (ASX: GYG) as one of Australia’s top shares, or at least, it has the potential to prove it’s one of the best in the coming years.

As the chart above shows, the Mexican restaurant business has seen enormous volatility since it listed on 21 June 2024.

But, at the time of writing, it’s down 37% in the past year and more than 55% since December 2024.

I’m not sure if the company will ever see declines of that size again in the future. But, I’ve been looking for opportunities away from the tech sector because of the uncertainties of how the AI future could play out.

I’m not convinced AI will become as widespread as some people believe due to costs, but I still think it’s wise to look at a wide array of opportunities.

There are a few great reasons why I think GYG shares are on course for a very good future.

Exciting plans for Australia

The most important part of GYG’s growth plans is what it wants to achieve in Australia.

GYG wants to reach 1,000 locations in Australia within the next 20 years. It had 242 restaurants at the end of the FY26 third quarter and it expects to open 32 restaurants in FY26. That’s an excellent growth runway.

In the FY26 third-quarter, Guzman Y Gomez reported network sales growth of around 20%. I’d describe a profitable business growing its top-line at around 20% (or more) per year, definitely makes it one of Australia’s top shares.

But, it’s not as though the new locations are entirely stealing growth from the existing network. In the FY26 third-quarter, the company said the Australia segment (which includes Singapore and Japan) delivered comparable sales growth of 6.6%.

GYG expects to deliver Australia segment underlying operating profit (EBITDA) of approximately $85 million in FY26, that represents 29% year over year growth.

International expansion

Investors should remain focused on the Australian division because that’s the segment that is likely to generate the most network sales and earnings.

But, its Asian network sales are also headed in a very pleasing direction.

I’m not sure how much GYG’s network sales will grow in Japan and Singapore in the next five years, but at the current rate of growth, it could become a sizeable contributor to Guzman Y Gomez.

In the third quarter of FY26, Asian network sales grew by 15% year over year to $21.5 million. If the network sales in Japan and Singapore continue growing by double-digits for the foreseeable future, then the future looks bright. But, the Asian network sales were only 6.7% of the Australian network sales.

Plus, GYG could decide to expand into other countries where its success may look more like the Asian success (and less like the US, where it has decided to exit).  

Rising profit margins could be key for one of Australia’s top shares

While the top-line of Guzman Y Gomez is growing at a very fast pace, its bottom line could increase at an even stronger rate because the company is expecting profit margins to improve in the coming years.

In FY26, it expects the Australia segment underlying EBITDA as a percentage of network sales to expand to between 6% to 6.2% in FY26 compared to 5.7% in FY25. In the long-term that profit margin is forecast by the business to rise towards 10%. That would represent a significant rise in dollar terms for the business, which bodes very well for the future, in my view.

According to the projection on CMC Invest, GYG could generate earnings per share (EPS) of 64.2 cents. That means it’s currently valued at 30x FY28’s estimated earnings. I think it’s an appealing price to invest in for the long-term.

The post A rare buying opportunity in 1 of Australia’s top shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Guzman Y Gomez. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.