Goldman Sachs has urged investors to dump shares in Mexican fast-food chain Guzman y Gomez because of its “stretched valuation”, favouring rival KFC operator Collins Foods, which the broker expects to rally 14 per cent.

Goldman initiated coverage on Guzman y Gomez with a “sell” rating, predicting its shares would drop 12 per cent to $33.20 over the next 12 months. The stock fell 2.2 per cent to $38.50 on Thursday.