Morgans bullish on Guzman y Gomez
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The news: Analysts at brokerage Morgans have outlined a bullish outlook for fast food chain Guzman y Gomez, saying the business has significant long-term growth potential.
The numbers: Morgans has initiated coverage on the stock with a 12-month price target of $30.80 and an ‘Add’ rating.
Shares in the company were up 0.4% to $25.60 in early trading on the ASX. However, since its IPO last month the stock has fallen 11.76%.
The context: Morgans’ analysts said while the GYG stock is trading at a premium to other ASX-listed fast food companies, its valuation is justified by a far superior growth profile. They expect the chain to hit its target of 1,000 stores in Australia by 2045, from 185 now.
They noted there was also further potential for growth in Japan, Singapore and the US.
What they said: “We believe investors buying into GYG at current prices will be well rewarded over time as the business realises its very significant long-term growth potential and its earnings benefit from strong operating leverage. We do not see our base case earnings assumptions as demanding in the context of historic performance,” the analysts said in a note.
The source: Morgans research
