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2 shares that doubled in 2015: What’s next for Collins Foods Ltd and Domino’s Pizza Enterprises Ltd?

As 2015 draws to an end, it appears as though it will have been a year for stock pickers.

The capitulation in commodity and energy markets, along with concerns about growth in the global economy in general, has seen investor sentiment weaken as the year progressed. The S&P/ASX 200 (Index: ^AXJO) (ASX:XJO) is currently down by more than 6% this year and unless a “Santa rally” comes soon, it is likely to finish the year in negative territory.

However, there have been some amazing share price performances.

Two standout shares for 2015 so far include:

1. Collins Foods Ltd (ASX: CKF) – The share price of Collins Foods has increased by more than 113% in 2015 and by more than 350% since 2012. The company owns and operates 174 KFC stores throughout Australia along with 23 Sizzler restaurants in Australia and Asia. The company has been investing significantly in the KFC brand to drive revenue and earnings growth over recent years and this strategy has proven to be successful.

The company recently released its first half results for FY16 that showed revenue growth of 5.1% but more importantly profit growth of more than 33%. Same store sales increased by 5.2% and at the same time margins have also increased through improved operational efficiency.

Pleasingly for shareholders, the dividend increased by 20% – a sign that the business is growing strongly.

The outlook for the remainder of the year is positive with Collins Foods expected to build another five KFC stores along with remodelling another seven stores that should help to drive revenue growth.

Despite the doubling of the share price in 2015, the shares are still only trading at around 15x earnings. If earnings momentum can continue in 2016, there is nothing stopping the share price from increasing further.

2. Domino’s Pizza Enterprises Ltd (ASX: DMP) –  It probably won’t be a surprise to many investors that Domino’s has had another great year, with the share price doubling since the start of the year. What is more impressive however, is the company’s long term performance – the share price has increased by more than 1,430% in the last 10 years.

Importantly, there hasn’t been a single dominant driver for the company’s success. Instead, a number of strategic initiatives have helped Domino’s to become the powerhouse it is today including acquisitions, international expansion, technological improvements, improved menus and a better understanding of consumer tastes.

In 2015, Domino’s delivered profit growth of 40% with improved contributions from all geographic markets. At its recent AGM, the company upgraded its full year guidance for FY16 after a strong first quarter. Domino’s expects underlying profits to increase by around 25% and to open up to 280 new stores in the year ahead.

Although the shares trade at an eye-watering valuation of 61x, the long-term growth potential for Domino’s is massive. While I wouldn’t be a buyer at current prices, it would not surprise me to see the share price even higher in 2016.

Collins Foods and Domino’s have had a great 2015 but there is another food company that I would prefer to invest new funds in – Retail Food Group Limited (ASX: RFG). The company operates in the same sector and is likely to deliver earnings growth of around 25% in the year ahead.

The share price has struggled in the second half of 2015 but looks quite attractive at current levels and could easily rebound in 2016. The stock trades at less than 12x earnings and a fully franked dividend yield of 5.5% makes this stock attractive for growth and income investors alike.

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Motley Fool contributor Christopher Georges owns shares in Retail Food Group. 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 owns shares of Retail Food Group Limited. 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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