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Investors hungry for growth should have Domino’s Pizza Enterprises Ltd. (ASX:DMP) on the radar

Investor appetite for household name retail food outlet and franchise company Domino’s Pizza Enterprises Ltd. (ASX: DMP) is strong, with the stock showing solid growth of late.

Domino’s shares are at $52.27 at the time of writing, up from $46.60 at this time last year, but well down on its August 29 52-week high of $57.70.

But Australian consumers certainly still seem to be hungry for its goods, with Domino’s selling more than 82.7 million pizzas on home soil in FY18 with free cash flow rising 125.8% to $120.6 million as 308 stores were added to the network globally.

And growth investors can expect growth to ramp up in the near future, with Domino’s targeting a long-term store count of 4650 stores by 2025 with an eye for acquisitions similar to the Hallo Pizza purchase it picked up in Germany during FY18.

If you’re seeking out a growth stock to buy and hold, Domino’s could be a good option.

FY18 results

Domino’s most recently released results were satisfactory but did disappoint some who expected better margins.

However, a 15% uptick in NPAT to $136.2 million, EPS growth of 14.4% and $2.59 billion in group network sales is nothing to sneeze at with Domino’s also lifting its full-year dividend by 15.5%.

Domino’s reported online sales to be growing strongly, up 19.4% to $269.5 million and now representing 63.9% of total group sales, with France the only location seeing lower-than-forecast sales due to increased food costs.

Looking forward, 12 new stores have already been opened in the first few trading weeks of FY19 with group EBIT guidance for FY19 expected to come in between $227 million and $247 million and the three-to-five-year outlook for group store growth at between 7% and 9%.

Growth pipeline

Domino’s opened an average of six stores per week in FY18, acquiring 163 stores from other brands and reporting success in its multi-market same-store sales growth strategy, with positive growth in all markets.

Domino’s CEO Dom Meij said, with successive years of compounding growth under its belt, the company’s bar for success is higher than ever.

Meij said ongoing long-term growth is “achievable” with Domino’s compounding growth in the range of between 3% and 6% – higher than its competitors – with 230% growth in the European market alone in the last three years.

Market Share

In terms of gobbling up market share globally, Domino’s will be using its recent success in Europe as a benchmark going forward.

Despite some challenges in France, Domino’s is in the midst of successfully integrating 130 Hallo Pizza stores into the network in FY18 with maiden stores to be open in Luxembourg in FY19 and the rest of its European segment performing above expectations with network sales rising 16.9% in FY18.

Domino’s has a target of 2600 European stores.

In Japan, Domino’s sales have increased by 3.2%, with significant growth reported in new customers and same-store sales up 12% – up from just 1.2% in FY17.

Domino’s target number of stores for Japan is 850.

Other growth shares, albeit in different sectors, that could feature on investors radars right now are Bravura Solutions Ltd (ASX: BVS) and Webjet Limited (ASX: WEB).

Bravura shares are trading around a 52-week high right now, so might be too expensive for a buy-in, but its 27% increase in NPAT for FY18 is hard to ignore, with its Sonata wealth management product, in particular, going great guns.

Webjet’s share price has had a small lull of late which could signal a buy for investors with their fingers on the pulse.

This tech-focused travel agent looks to have a strong future ahead of it as travellers shift to online bookings in droves.

Foolish Takeaway

I think Domino’s is a quality growth share to consider, with its long-term prospects making it a buy and hold type opportunity. If its last decade of growth is anything to go by, the future looks bright and, for now, its global evolution seems to be progressing swimmingly. However, there is always more risk associated with opening more stores, particularly across such a broad geographic footprint.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Bravura Solutions Ltd. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited and Webjet Ltd. 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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