The Guzman Y Gomez Ltd (ASX: GYG) share price is an interesting investment idea after a recent share sale by a leadership insider.
GYG is a Mexican restaurant business that has both corporate-owned locations and franchise locations in Australia. It also has a presence in Singapore and Japan through franchises.
Sale
According to the ASX, Guy Russo recently sold almost 1.4 million Guzman Y Guzman shares, which is a sizeable chunk.
Seeing leadership sell shares can be a warning sign, though it doesn’t necessarily mean bad news is coming. It could just be for asset diversification purposes or increasing the number of GYG shares on the market (free float). Time will tell.
The Mexican food business noted that Russo has been a shareholder of the business for 17 years. He backed the business for many years before its listing and has been the Chair since 2018.
During his time involved with the business, he has sold very few shares. After this sale, he will still own 77% of what he owned before, being 4.69 million GYG shares.
Guy Russo said:
GYG’s long-term strategy continues to have my full confidence, and my commitment as Chair is unchanged. I intend to remain as a significant long-term shareholder in GYG and am committed to ensuring the ongoing success of the business for many years to come.
Is this a good time to buy Guzman Y Gomez (GYG) shares?
It’s not exactly trading at a cheap price, either by looking at the last 52 weeks of trading or on a price/earnings ratio (P/E ratio) basis.
But, the company continues to grow at a strong pace, which I think is one of the most exciting things about the company.
In the first quarter of FY27, total network sales grew 18.8% to $387.5 million, which included $363 million of Australian network sales and $24.5 million of Asian sales.
A significant portion of the growth was powered by comparable sales increasing 7.1%. In other words, the existing restaurant network is seeing strong sales growth amid new food items and ongoing growth of customer visits.
It expects to open 35 new restaurants in Australia during FY27, which could be a good driver of earnings. Over time, it aims to reach 1,000 restaurants in Australia. I’m also hopeful it can reach a sizeable restaurant total in Japan, Singapore and potentially elsewhere.
GYG also said that it expects its FY27 underlying EBITDA (EBITDA explained) as a percentage of network sales to grow to between 6.7% to 6.9%, up from 6.2% in FY26.
Rising revenue and improving profit margins could be a winning combination for the Guzman Y Gomez share price over the next five years.
