Top broker rates Domino’s Pizza Enterprises Ltd as a buy

The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price is having a solid day of trade on Tuesday.

In afternoon trade the pizza chain operator’s shares are up 2% to $42.80.

Why are its shares higher?

As well as following the market higher today as it rebounds from yesterday’s sell-off, Domino’s shares were given a boost this morning from a broker note out of Morgan Stanley.

According to the note, the broker has retained its overweight rating and $55.00 price target on its shares after the company made an announcement regarding employee pay yesterday.

That announcement revealed that the company has decided to keep its employees on the Fast Food Industry Award rather than seek approval for a new enterprise bargaining agreement (EBA).

Although the EBA is likely to have been better for Domino’s, the broker thinks the difference is will be negligible and continues to expect the company to achieve earnings per share of $1.56 in FY 2018.

Based on its current share price, Morgan Stanley’s price target implies a potential return of approximately 28% over the next 12 months. This increases to over 30% if you factor in Domino’s trailing partially franked $1.03 dividend.

Shareholders will no doubt be hopeful that Domino’s shares can reach this price target and retrace some of their recent declines. Domino’s shares are down a disappointing 25% since this time last year.

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Motley Fool contributor Motley Fool Staff has no position in any stocks mentioned. 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 Scott Phillips.

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