3 reasons to buy Domino's Pizza Enterprises Ltd.

Buying Domino's Pizza Enterprises Ltd. (ASX:DMP) could lead to stunning capital gains

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For most Aussie investors, 2015 has been disappointing, with the ASX having fallen by 2.5% since the turn of the year. However, for investors in fast-food chain Domino's Pizza Enterprises Ltd. (ASX: DMP), this year has been phenomenal, with the company's share price soaring by 85% year-to-date.

A key reason for this is the company's strategy. It has stormed ahead of its rivals by offering a much more personalised and simplified ordering process. For example, ordering a pizza through Domino's is a very different experience than at most fast-food chains, with customers being able to create their own pizzas using a wide range of ingredients. This resonates well with customers and has led to growth in the company's top line of 15.3% during the last year.

Adoption of technology

In addition, Domino's has embraced social media to a much greater extent than most of its rivals. Pizza creations can be shared easily via social media, which provides Domino's with a free marketing stream. And, with other neat touches such as a GPS driver tracker and a more fun brand than most of its relatively stale competitors, Domino's is quickly becoming the 'go-to' destination for teens and twentysomething people.

Diversifying its offering

Meanwhile, Domino's has been able to diversify its menu in recent years and this has helped it to grab market share from its rivals. For example, it now offers a number of chicken options as well as a range of desserts, thereby increasing its sales and margin growth.

Global expansion

As well as a sound strategy, Domino's has the scope to expand its business across the globe. For example, it aims to double its store footprint in Asia, where it is relatively underrepresented and is also expanding in Europe, too, with the recent acquisition in France of Pizza Sprint providing evidence of this.

Certainly, its sales in Australia have the potential to come under pressure if the economy endures a recession which could harm consumer spending on non-staple items. However, with Domino's having such vast regional diversification, the other geographic locations in which it operates not only have the potential to expand, but also offset any weakness within the Australian fast-food market.

Looking ahead, Domino's is forecast to grow its bottom line at an annualised rate of 27.9% during the next two years following a recent upgrade to its guidance. However, this is not a temporary rate of growth, with the company's excellent track record providing evidence of this. For example, in the last five years Domino's has been able to increase its net profit at an annualised rate of 24%, which indicates that it is a fast-growing but also highly resilient and stable company.

With the ASX's future being highly uncertain and set to remain so in the medium term, stocks such as Domino's have scarcity value and, alongside its sound strategy and expansion potential, this makes it a strong buy at the present time.

Motley Fool contributor Peter Stephens has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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