The Guzman Y Gomez Ltd (ASX: GYG) share price has risen almost 23% since its opening-day closing price of $30. It's an incredible achievement considering some investors were calling the initial public offering (IPO) price of $22 expensive.

Being a GYG shareholder has been rewarding due to capital growth, and I believe there are still reasons to remain optimistic.

Although there will likely be volatility over the next few years, I'd view these periods as opportunities to buy discounted shares of a compelling business.

Strong comparable growth

I think it's essential for a retail business to deliver growth from within its existing locations. This demonstrates a company's performance in existing regions and the health of its overall network.

If comparable sales are weak, this could imply customers are turning away from the business, and there may be stronger competition.

Guzman y Gomez reported that its Australian, Singaporean, and Japanese net sales had combined comparable year-over-year growth of 8.7% in the first quarter of FY25. This level of comparable growth is very good, in my opinion, considering the economic challenges facing households, and also doesn't take into account the network's growth.

Store rollout plans

GYG is growing rapidly, partly due to the number of new restaurants it has added to its network each year and plans to keep adding.

At 30 September 2024, the business had 226 locations across Australia, Singapore, Japan and the US. That represented an increase of 10.8% year over year, which is a great tailwind for Guzman y Gomez shares.

If GYG can keep adding a sizeable number of locations to its portfolio each year, then it can really supercharge its growth. In the FY25 first quarter, the business reported total network sales growth of 20.7%.

Guzman y Gomez currently has an ultra-long-term target of 1,000 Australian locations, which, in my view, would unlock a significant increase in profitability for the business due to scale benefits.

Improving margins

I think one of the most important factors for GYG shares' future success will be increasing profit margins, which could significantly improve the bottom line.

It's very pleasing to see profit rise faster than revenue because investors typically value a business based on profit.

In the FY24 result, Guzman y Gomez reported its revenue increased 32.1% to $342.2 million, underlying operating profit (EBITDA) rose by 52.9% to $44.8 million, and underlying profit before tax (PBT) jumped 113.7% to 16.3 million.

Pleasingly, the company reported that its corporate restaurant profit margin increased from 14.4% to 17.4%, a three percentage point increase.

With impressive plans to grow significantly in scale over the next decade or two, I believe Guzman y Gomez shares can continue rising, despite current valuations.