The Guzman Y Gomez Ltd (ASX: GYG) share price had a rough end to the week, falling by 14% on Friday after the company reported its FY25 half-year results.

These sorts of reactions may be surprising to some investors because of how strong many of the numbers were for GYG. But it comes down to expectations – if investors are expecting even more growth than what GYG reported, then the market will be disappointed, even if the stock's revenue growth is stronger than what most companies have revealed in this reporting season.

On the face of it, Guzman y Gomez's financial figures looked impressive, but not for the market.

Let's look at what those numbers were, and then I'll give my opinion.

GYG earnings recap

The company's goal is to be the "best and biggest restaurant company in the world". The HY25 report was a small step in that direction.

GYG reported network sales growth of 22.8% to $577.9 million, operating profit (EBITDA) growth of 28.3% to $31.6 million, and net profit after tax (NPAT) rose 91.2% to $7.3 million.

Australian network sales grew 22.7% to $538.2 million, Singapore network sales increased 30.2% to $30.2 million, and Japan network sales rose 8.6% to $4.6 million. Excluding the US, comparable sales growth was 9.4%.

The Mexican food business reported that 16 new restaurants were opened in the first half of FY25, while 32 restaurants were approved. As at 31 December 2024, the company had 103 sites in its pipeline.

However, US network sales in HY25 fell 12.7% to $4.9 million, and the US segment's underlying operating loss (EBITDA) worsened by 62% to $5 million.

Pleasingly, the business said it expects to exceed its FY25 net profit forecast in the initial public offering (IPO) prospectus. In the seven weeks of the half, the Australian (with Japan and Singapore) segment comparable sales growth was above expectations at 12.2%.

Is the Guzman y Gomez share price a buy?

The market didn't think the result was good enough to justify the valuation staying above $45 per share.

However, GYG noted there are a number of things that could unlock pleasing earnings growth in the coming years.

The ongoing restaurant rollout in Australia, the US, Japan, and Singapore could help grow earnings thanks to higher revenue and improved margins due to operating leverage.

It can also expand its restaurant sales by selling more products at different times of the day (such as breakfast and 24/7 trading), doing ongoing marketing, creating menu innovation (including new items and deals), and enhancing the guest experience.

GYG also said it's growing digitally through its mobile app and website, the loyalty program, delivery, and it's investing in its systems.

But the current valuation does suggest the market is already expecting significant growth. Before seeing the result, broker UBS predicted that by FY29, the company could generate $122 million of annual net profit, implying the current Guzman y Gomez share price is valued at 34x FY29's estimated earnings. Considering that's four years away, it's a high valuation for a fairly low-margin business.

There's also the fact that the board, senior management, eligible franchisees, and major shareholders, including TDM Growth Partners and Barrenjoey, agreed not to sell any shares for a while after listing (called an escrow). A quarter of these shares (13.6% of issued capital) will be released from restrictions, at the earliest, on 10 March 2025. More GYG shares on the open market could result in a lower share price in the shorter term.

I wouldn't choose to invest today. Instead, I'd wait until at least April because a significant sale by shareholders could open up a better share price to buy at. However, just because shareholders can sell shares doesn't mean they will sell all of them, or any.

If restaurant numbers, comparable sales, and margins keep rising, I think this is definitely one globally growing business to watch for a buying opportunity this year and beyond. But I'm not thinking about buying more at this price-earnings (P/E) ratio valuation.